Question

An investor plans to invest $500 a year and expects to get a 10.5% return. If the investor makes these contributions at the end of the next 20 years, what is the present value of this investment today?

Answer 1

The present value of the investment is $6000.

According to the statement

Principal amount = $500

and Return amount = 10.5%

Time period = 20 years.

Now we find the present value of money then

By the formula

PV = P[1-(1+r)^n]/r

PV = 500[1-(1+0.10)^20]/0.10

PV = 6000

So, The present value of the investment is $6000.

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