An investment paying $2,000 in 2 years, $6,000 in 4 years and $5,000 in 12 years at an interest rate of 5% per annum has a present value of:

Question

Quizplus · Accepted Answer

The present value (PV) of each cash flow is calculated using the formula PV = FV / (1 + r)^n, where FV is the future value, r is the interest rate, and n is the number of years. Calculating each: $2,000/(1.05)^2 + $6,000/(1.05)^4 + $5,000/(1.05)^12 gives a total PV of approximately $9,534.46.

An Investment Paying $2,000 in 2 Years, $6,000 in 4