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Homework answers / question archive / You are considering an investment that promises to pay $1,000 per year for the next 10 years
You are considering an investment that promises to pay $1,000 per year for the next 10 years. The interest rate associated with investments having similar risk is 6.0%.
How much would you be willing to pay for this investment?
We can calculate the present value by using the following formula in excel:-
=-pv(rate,nper,pmt,fv)
Here,
PV = Present value
Rate = 6.0%
Nper = 10 periods
Pmt = $1,000
FV = $0
Substituting the values in formula:
= -pv(6%,10,1000,0)
= $7,360.09
