Ask Question
12 August, 13:14

Suppose you the alternative of receiving either $22,000 at the end of five years or P dollars today. Currently, you have no need for money, so you could deposit the P dollars in a bank that pays 5% interest. What value of P would make you indifferent in your choice between P dollars todays and the promise of $22000 at the end of five years?

+2
Answers (1)
  1. 12 August, 16:10
    0
    Indifference amount = $17,237.58

    Explanation:

    Giving the following information:

    Suppose you the alternative of receiving either $22,000 at the end of five years or P dollars today.

    We need to find the present value of $22,000 at an interest rate of 5%.

    PV = FV / (1+i) ^n

    PV = 22,000 / 1.05^5 = $17,237.58
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “Suppose you the alternative of receiving either $22,000 at the end of five years or P dollars today. Currently, you have no need for money, ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers