You expect to receive $10,000 as a bonus after 6 years. You have calculated the present...

You expect to receive $10,000 as a bonus after 6 years. You have calculated the present value of this bonus and the answer is $7000. What interest rate did you use in your calculation... approximately?

Expert Solution

P = 7000, F = 10000, t = 6 yrs

F = P *(1+i)^t

10000 = 7000 * (1+i)^6

(1+i)^6 = 10000 / 7000 = 1.42857

1+i = 1.42857 ^ (1/6) = 1.061248

i = 1.061248 - 1 = 0.061248 ~ 6.12%

Rahul Sunny answered 2 years ago

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