Suppose you have 3 years to live and you value each year of life at $7 million but have a discount rate of 5%.How much do you value the rest of your life in today's dollars?
A) $20 million
B) $19.06 million
C) $21 million
D) $18.14 million

Question

Quizplus · Accepted Answer

In order to calculate the present value of the remaining 3 years, we can use the formula:

PV = FV / (1+r)^n

where PV is the present value, FV is the future value (in this case, the total value of the 3 years of life), r is the discount rate, and n is the number of years.

So, plugging in the values we have:

PV = (3 years x $7 million per year) / (1+0.05)^3
PV = $19.06 million

Therefore, the present value of the remaining 3 years is $19.06 million. So, the best choice is B.

Suppose You Have 3 Years to Live and You Value