Suppose an investment will pay $11,000 in 41 years from now. If you can earn 14.55% interest compounded monthly by depositing your money in a bank, how much should you pay for the investment today?Round your answer to two decimal places. For example, if your answer is $345.667 round as 345.67 and if your answer is .05718 or 5.718% round as 5.72.A. $31.59B. $31.30C. $26.04D. $25.74E. $29.25

Question
Asked Sep 22, 2019
Suppose an investment will pay $11,000 in 41 years from now. If you can earn 14.55% interest compounded monthly by depositing your money in a bank, how much should you pay for the investment today?

Round your answer to two decimal places. For example, if your answer is $345.667 round as 345.67 and if your answer is .05718 or 5.718% round as 5.72.
A. $31.59
B. $31.30
C. $26.04
D. $25.74
E. $29.25
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Expert Answer

Step 1

Calculate the present value of investment.

1
Present value
Interest rate
Terms (in year)
Compounding period per year (in months)
Present value
$ 11,000
14.55%
2
41
4
12
$29.25
5
6
7
help_outline

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1 Present value Interest rate Terms (in year) Compounding period per year (in months) Present value $ 11,000 14.55% 2 41 4 12 $29.25 5 6 7

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Step 2

Excel workings:

1
Present value
Interest rate
Terms (in year)
Compounding period per year (in months)
|Present value
11000
0.1455
41
12
|-PV(C3/C5,C4*C5,0,-C2)
2
4
5
6
7
help_outline

Image Transcriptionclose

1 Present value Interest rate Terms (in year) Compounding period per year (in months) |Present value 11000 0.1455 41 12 |-PV(C3/C5,C4*C5,0,-C2) 2 4 5 6 7

fullscreen
Step 3

From the above calculation it is clear that options "A, B, C and D...

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