What would you pay for an investment that pays you £500,000 after forty years? Assume that the relevant interest rate for this type of investment is 6%.

Question

Quizplus · Accepted Answer

The present value (PV) of a future sum of money can be calculated using the formula: PV = FV / (1 + r)^n, where FV is the future value (£500,000), r is the interest rate (0.06), and n is the number of years (40). Plugging in the values, the calculation is: PV = £500,000 / (1.06)^40, which equals approximately £48,610.

What Would You Pay for an Investment That Pays You