An investment pays $2,000 every month for 2 years.Your opportunity cost is 10% compounded annually.The present value of this investment is closest to

Question

Quizplus · Accepted Answer

First, we need to calculate the present value of the investment using the formula for the present value of an annuity:

PV = C * [(1 - (1 + r)^-n) / r]

Where PV is the present value, C is the cash flow per period, r is the discount rate, and n is the number of periods.

In this case, C = $2,000, n = 24 (2 years * 12 months/year), and r = 0.1/12 (the monthly opportunity cost rate).

PV = $2,000 * [(1 - (1 + 0.1/12)^-24) / (0.1/12)] = $43,529

Therefore, the closest option is B.

An Investment Pays $2,000 Every Month for 2 Years