Samantha has holdings of 250 troy ounces of platinum,currently valued at $815 dollars per ounce.She estimates that the price of platinum will rise to $850 per ounce in the next year.If the interest rate is 8%,should she sell the platinum today?

Question

Quizplus · Accepted Answer

If Samantha sells the platinum today, she will receive 250 * $815 = $203,750. If she waits one year, she will receive 250 * $850 = $212,500. However, she will also have to pay interest on the $203,750 for one year at 8%, which is $203,750 * 0.08 = $16,300. Therefore, her total proceeds from selling the platinum in one year will be $212,500 - $16,300 = $196,200. The difference between selling now and selling in one year is $203,750 - $196,200 = $7,550.

Samantha Has Holdings of 250 Troy Ounces of Platinum,currently Valued