If a 14% rate of return can be achieved, how much will need to be invested today in order to receive $12,000 at the end of 3 years plus $10,000 at the end of 5 years? Round to the nearest whole number.

Question

Quizplus · Accepted Answer

To find out how much needs to be invested today to receive $12,000 at the end of 3 years and $10,000 at the end of 5 years with a 14% rate of return, we use the present value formula for each cash flow and sum them up. The present value formula is PV = FV / (1 + r)^n, where PV is the present value, FV is the future value, r is the rate (as a decimal), and n is the number of periods.For $12,000 at the end of 3 years: PV = $12,000 / (1 + 0.14)^3 ≈ $8,536.88For $10,000 at the end of 5 years: PV = $10,000 / (1 + 0.14)^5 ≈ $4,757.12Adding these two present values together gives the total amount that needs to be invested today: $8,536.88 + $4,757.12 ≈ $13,294.

If a 14% Rate of Return Can Be Achieved, How