An investment will pay $3000 six months from now. What purchase price will provide a rate of return of 12%?
A) $2830.19
B) $3180.00
C) $2000.00
D) $2500.00
E) $2724.17

Question

Quizplus · Accepted Answer

The present value (purchase price) can be calculated using the formula for present value: PV = FV / (1 + r/n)^(nt). Here, FV = $3000, r = 0.12, n = 2 (since it's semi-annual), and t = 0.5 (half a year). Plugging in these values gives PV = $3000 / (1 + 0.12/2)^(2*0.5) = $2830.19.

An Investment Will Pay $3000 Six Months from Now