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19 April, 11:46

Suppose that an investment will return a payoff of $220 after one year, plus another $484 after two years. what is the present discounted value of that investment if the interest rate is 10%?

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  1. 19 April, 11:50
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    Present value of $220 = 220 / 1.1

    Present value of $220 = 200

    Present value of $484 = 484 / 1.1²

    Present value of $484 = $400

    The net present value of the investment is: 200 + 400

    = $600
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