Someone calculated the future worth of his investment in term of today’s dollars. The obtained result was 945,

Someone calculated the future worth of his investment in term of today’s dollars. The obtained result was 945,

 

 

 

answer:

the formuala for future value is FV=P(1+r)n , given interest rate and inflation rate,

real rate =[(1+nominal rate)/(+inflation)]-1 now inflation is 7% and nominal rate is 14%

hence real rate = [(1+0.14)/(1+0.7)]-1 = 0.0654

now FV = $945895 and n=20 years so FV=P(1+r)n

$945895 = P(1+0.0654)20

$945895 = P(3.55) ; HENCE P ~ $266449 WHICH WOULD BE THE FIRST COST OF INVESTMENT

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