Monica wants to sell her share of an investment to Barney for $50,000 in three years. If money is worth 6% compounded semiannually, what would Monica accept today?

Question

Quizplus · Accepted Answer

We can use the formula PV = FV/(1+r/n)^(nt) where FV is the future value, r is the interest rate, n is the number of times the interest is compounded per year, and t is the number of years. Plugging in the values, we get PV = 50000/(1+0.06/2)^(2*3) = $41,874. Therefore, Monica would accept $41,874 today. Option B is the correct answer.

Monica Wants to Sell Her Share of an Investment to Barney