You estimate that a piece of real estate for investment will be worth $700,000 in ﬁve years. The current interest rate is 3 percent. What is the present value of this investment?

Question

Quizplus · Accepted Answer

The present value (PV) can be calculated using the formula PV = FV / (1 + r)^n, where FV is the future value ($700,000), r is the interest rate (3% or 0.03), and n is the number of periods (5 years). Plugging in the values, PV = $700,000 / (1 + 0.03)^5 ≈ $604,000.

You Estimate That a Piece of Real Estate for Investment