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20 October, 11:26

An investment product promises to pay $42,000 at the end of 10 years. If an investor feels this investment should produce a rate of return of 12%, compounded annually, what's the most the investor should be willing to pay for the investment? a) $42,000b) $15,146c) $13,523d) $130,446

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  1. 20 October, 11:51
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    Investor willing to pay for investment $13523

    Explanation:

    Using the formula

    PV = FV x (1 / (1+r) ^ n

    PV = $42000 x (1 / (1+0.12) ^10

    PV = 42000 x 0.322

    PV = $13523
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