Samantha has holdings of 250 ounces of platinum, currently valued at $815 dollars per ounce. She estimates that the price of platinum will rise to $850 per ounce in the next year. If the interest rate is 8%, should she sell the platinum today?

Question

Quizplus · Accepted Answer

The difference between selling now and selling in one year is $7550 dollars today. This is calculated as follows:Selling now: 250 ounces * $815 per ounce = $203,750Selling in one year: 250 ounces * $850 per ounce = $212,500Difference: $212,500 - $203,750 = $7550The interest rate is 8%, so the present value of the $7550 difference is $7550 / (1 + 0.08) = $6991. Therefore, Samantha should sell the platinum today.

Samantha Has Holdings of 250 Ounces of Platinum, Currently Valued