Question

Monica wants to sell her share of an investment to Barney for $150,000 in 6 years. If money is worth 6% compounded semiannually, what would Monica accept today?

Answer 1

Answer:

PV= $105,206.99

Explanation:

Giving the following information:

Future Value (FV)= $150,000

Number of periods= 6*2= 12 semesters

Interest rate= 0.06/2= 0.03

To calculate the present value (PV), we need to use the following formula:

PV= FV/(1+i)^n

PV= 150,000 / (1.03^12)

PV= $105,206.99