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tino4ka555 [31]
3 years ago
13

Present and future value

Business
1 answer:
Sidana [21]3 years ago
8 0

Answer:

$ 17,002.21  (none of the options is correct)

Explanation:

The formula for determining the present value ,which is the actual amount invested to give a future value is given below:

PV=FV*(1+r)^-n

The PV is the present value which is unknown

FV is the future worth of the investment which is $24,000

r is the rate of return which is 9% per year

n is the duration of investment which is 4 years

PV=$24,000*(1+9%)^-4

PV=$24,000*(1.09)^-4

PV=$24,000*0.708425211 =$ 17,002.21  

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Here Nicolas will gain comparative advantage only when he is selling the good he is specializing in and he would specialize in that good which would have lower opportunity cost for him. So the first step that we have to do here is to find out for which good Nicolas will have lower opportunity cost.

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