An investment of $10,000 promises a payment of $13,000 after six years. If the annual rate of interest is $8%, what is the net present value of the investment?
What will be an ideal response?
Present value of the payment to be received after six years = $13,000/(1.08 )6 = $8,192.21.
Net present value of the investment = $8,192.21- $10,000 = -$1,807.80.
Economics
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