What sum would you have to receive in 5 years' time to make you indifferent between that sum and $1,000 in 10 years' time? Assuming that the interest rate is 10% p.a.

Question

Quizplus · Accepted Answer

Have to find the PV of the $1,000 to be received in 10 years' time at Year 5 using the PV of a single sum formula PV = FV (1 + r)^-n PV₅ = $1,000 (1 + 0.10)^-5 PV₅ = $1,000 (0.6209) PV₅ = $620.92 ? $621.

What Sum Would You Have to Receive in 5 Years