A real estate agent wants you to buy a plot of land today for $60,000 and he promises that you can sell it back to him in 7 years for $100,000.If you can earn 9% on alternative investments,then what is the present value of the sales proceeds? Is this a worthwhile investment?
A) $54,703.42; it is not a worthwhile investment.
B) $54,703.42; it is a worthwhile investment.
C) $61,294.51; it is not a worthwhile investment.
D) $61,294.51; it is a worthwhile investment.
E) $60,000; not enough information.

Question

Quizplus · Accepted Answer

PV = 11ea7fdb_fc2c_7a43_a768_89a878ce3325_TB2902_00 PV = 11ea7fdb_fc2c_7a44_a768_e7a0172bfbe1_TB2902_00 = $54,703.42
Using a financial calculator:
N = 7, I/Y = 9, PMT = 0, FV = -100,000, cpt PV = $54,703.42
54,703.42 < 60,000 so this is not a worthwhile investment

A Real Estate Agent Wants You to Buy a Plot