Question

You have been offered a project paying $300 at the beginning of each year for the next 20 years. what is the maximum amount of money you would invest in this project if you expect 9 percent rate of return to your investment?

Answer 1

This is a simple problem with some quick addition and subtraction, and a bit of multiplication.

First we figure out how much money you're spending in total, which is $300 each year, for 20 years, so 300 x 20 = 6,000. Now, since the problem is asking for a maximum amount for percentage rate, this means we find the 9% for all 20 years combined and not individually. 9% of 6,000 is of course 540, so if we subtract 540 from 6,000, we get 5,460.

This means your answer is $5,460