Question

In: Economics

you are planning to build a house at a cost of SR950, 000 one year from...

you are planning to build a house at a cost of SR950, 000 one year from now; however, a contractor who needs work has offered to build your house for SR 740,000 if he will do the building now instead of one year from now. If the interest rate is 14% per year. A discount you getting is closest to:

Solutions

Expert Solution

Future value = SR 950,000

Present value = SR 740,000

Interest rate = 14%

At an interest rate of 14% the future value will be

F = 740,000 (F/P,14%,1) = 740,00 × 1.14 = SR 843,600

Assume the discount rate is i.

Discount rate for which Future value will discount to present value is 28.38%.

Rahul Sunny answered 2 years ago
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