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 of an investment is the current worth of a future sum of money or stream of cash flows given a specified rate of return. In this case, the future value is $700,000, the interest rate is 3%, and the time period is 5 years. Using the formula for present value, we can calculate the present value as follows:PV = FV / (1 + r)^nPV = 700,000 / (1 + 0.03)^5PV = 604,000Therefore, the present value of the investment is $604,000.

You Estimate That a Piece of Real Estate for Investment