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Suppose your opportunity cost rate is 11 percent compounded annually
Suppose your opportunity cost rate is 11 percent compounded annually.
(a) How much must you deposit in an account today if you want to pay yourself $230 at the end of each of the next 15 years?
Expert Solution
We can calculate the present value by using the following formula in excel:-
=-pv(rate,nper,pmt,fv)
Here,
PV = Present value
Rate = 11%
Nper = 15 periods
Pmt = $230
FV= $0
Substituting the values in formula:
= -pv(11%,15,230,0)
= $1,653.90
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