Present value of money You have a contract that entitles you

Present value of money

You have a contract that entitles you to receive $1 million 20 years from now. But can\'t wait and want your money now. You want to sell your contract. What is a fair price for it? Assume the risk free, inflation adjusted interest rate is 3% per year, compounded continuously.

Solution

P = F / e^(rt) = 1000000 / 2.71828...^(.03*20) = 517281.85797...