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MAVERICK [17]
3 years ago
7

Suppose you the alternative of receiving either $22,000 at the end of five years or P dollars today. Currently, you have no need

for money, so you could deposit the P dollars in a bank that pays 5% interest. What value of P would make you indifferent in your choice between P dollars todays and the promise of $22000 at the end of five years?
Business
1 answer:
Marysya12 [62]3 years ago
4 0

Answer:

Indifference amount= $17,237.58

Explanation:

Giving the following information:

Suppose you the alternative of receiving either $22,000 at the end of five years or P dollars today.

We need to find the present value of $22,000 at an interest rate of 5%.

PV= FV/(1+i)^n

PV= 22,000/ 1.05^5= $17,237.58

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3 years ago
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