Assuming that an investor requires a 10% annual yield over the next 12 years, how much would she be willing to pay for the right to receive $20,000 at the end of year 12?
A) $6,053.91
B) $6,372.62
C) $62,768.57
D) $136,273.84

Question

Quizplus · Accepted Answer

To calculate the present value of $20,000 to be received after 12 years with a required yield of 10%, we can use the formula:
PV = FV / (1 + r)^n
Where PV is the present value, FV is the future value, r is the required yield and n is the number of years. 
Plugging in the values, we get:
PV = 20,000 / (1 + 0.1)^12
PV = $6,372.62
Therefore, the investor would be willing to pay $6,372.62 for the right to receive $20,000 at the end of year 12.

Assuming That an Investor Requires a 10% Annual Yield Over