Question

. An investor anticipates receiving a single payment of $18,000 in 20 years. Assume an

    opportunity cost of 10%, compounded annually. [11 points]

(a) Calculate the value of this investment now.(b) Apply the relevant financial function command (with each numerical value reported

      in correct sequence) that would solve for the current value assuming semiannual

      compounding.

Answer 1

a)
	PV= FV/(1+r)^n
	Where,
	FV= Future Value
	PV = Present Value
	r = Interest rate
	n= periods in number
	= $18000/( 1+0.1)^20
	=18000/6.7275
	= $2675.59
b)
	PV= FV/(1+r)^n
	Where,
	FV= Future Value
	PV = Present Value
	r = Interest rate =10%/2 =5%
	n= periods in number =20*2 =40
	= $18000/( 1+0.05)^40
	=18000/7.03999
	= $2556.82