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28 October, 18:44

An investment will pay you $91,000 in five years. assume the appropriate discount rate is 6.25 percent compounded daily. what is the present value?

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  1. 28 October, 21:34
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    Given:

    Value = $91,000, value after 5 years

    t = 5 years

    n = 365, daily compounding

    r = 6.25% = 0.0625, discount rate

    Note that

    n*t = 365*5 = 1825

    Let P = principal, the current value

    Then

    P (1 + 0.0625/365) ¹⁸²⁵ = 91000

    1.3668P = 91000

    P = $66,578.80

    Answer: $66,758.80
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