Question:
John has an investment opportunity that promises to pay him $16,000 in four years. He could earn a 6%
annual return investing his money elsewhere. What is the maximum amount he would be willing to invest
in this opportunity?
Answer:
John would be willing to invest no more than $12,673 in this opportunity.
PV = $16,000 (.79209) = $12,673
Present value of $1: n = 4, i = 6% (from Table 2)
John has an investment opportunity that promises to pay him $16,000 in four years. He could earn a 6%
annual return investing his money elsewhere. What is the maximum amount he would be willing to invest
in this opportunity?
Answer:
John would be willing to invest no more than $12,673 in this opportunity.
PV = $16,000 (.79209) = $12,673
Present value of $1: n = 4, i = 6% (from Table 2)
