An investment product promises to pay $42,000 at the end of 10 years. If an investor feels this investment should produce a rate of return of 12%, compounded annually, what's the most the investor should be willing to pay for the investment? a) $42,000b) $15,146c) $13,523d) $130,446

Question

Business

Helen

28 December, 21:43

An investment product promises to pay $42,000 at the end of 10 years. If an investor feels this investment should produce a rate of return of 12%, compounded annually, what's the most the investor should be willing to pay for the investment? a) $42,000b) $15,146c) $13,523d) $130,446

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Braylon Vaughan · Answer 1

Investor willing to pay for investment $13523

Explanation:

Using the formula

PV = FV x (1 / (1+r) ^ n

PV = $42000 x (1 / (1+0.12) ^10

PV = 42000 x 0.322

PV = $13523