An investment pays you $30,000 at the end of this year, and $10,000 at the end of each of the four following years. What is the present value (PV)of this investment, given that the interest rate is 5% per year?

Question

Quizplus · Accepted Answer

The present value is calculated by discounting each cash flow back to the present using the formula PV = CF / (1 + r)^n, where CF is the cash flow, r is the interest rate, and n is the year. The sum of these discounted cash flows gives the total present value.

An Investment Pays You $30,000 at the End of This