Suppose you have the alternative of receiving either $15,000 at the end ofseven years or P dollars today. Currently, you have no need for the money, soyou could deposit the P dollars into a bank account that pays 6% interest compounded annually. What value of P would make you indifferent in your choice between P dollars today and the promise of $15,000 at the end of seven years?

Microeconomics
13th Edition
ISBN:9781337617406
Author:Roger A. Arnold
Publisher:Roger A. Arnold
Chapter16: Interest, Rent, And Profit
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Suppose you have the alternative of receiving either $15,000 at the end of
seven years or P dollars today. Currently, you have no need for the money, so
you could deposit the P dollars into a bank account that pays 6% interest compounded annually. What value of P would make you indifferent in your choice between P dollars today and the promise of $15,000 at the end of seven years?

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