If you hold a valid contract that will pay you 8000 cash 10

If you hold a valid contract that will pay you $8.000 cash 10 ycars from now and the going rate of intcrest is 10 per- cent, what is its present value? Use a convenient format to display your compul tions and round to the nearest dollar. 4. 7.

Solution

i = 0.1

amount = $8,000

n = 10

Present Value = 1/(1.1)^10 * $8,000

= 0.384*8,000

Present Value= $3,084