Your portfolio of investments consists of a $10,000 loan due at the end of 5 years with interest at j₁ = 10%,and a $25,000 loan due at the end of 10 years with interest at j₁₂ = 6%.What is the present value of this portfolio at j₂ = 8%? (Answer to nearest dollar)

Question

Quizplus · Accepted Answer

We can find the present value of each loan separately using the formula:

Present Value = Future Value / (1 + r)^n

where r is the discount rate and n is the number of years in the future.

For the first loan, the present value is:

Present Value = 10,000 / (1 + 0.08)^5 = 6,710.81

For the second loan, the present value is:

Present Value = 25,000 / (1 + 0.08)^10 = 16,928.64

The total present value of the portfolio is the sum of these two values:

Total Present Value = 6,710.81 + 16,928.64 = 23,639.45

Rounded to the nearest dollar, the answer is C) $31,639.

Your Portfolio of Investments Consists of a $10,000 Loan Due