Question

Jing Associates, LLC, a large law firm in Denver, is building a new office complex. To pay for the construction, Jing Associates is selling a security that will pay the investor the lump sum of $38,600 in nine years. The current market price of the security is $16,429. Assuming that you can earn an annual return of 8.25% on your next most attractive investment, how much is the security worth to you today

Answer 1

Answer:

PV= $18,911.94

Explanation:

Giving the following information:

Future Value= $38,600

Interest rate= 8.25%

Number of periods= 9 years

To calculate the present value of the security, we need to use the following formula:

PV= FV / (1+i)^n

PV= 38,600 / (1.0825^9)

PV= $18,911.94