Question

Would you be willing to pay $24,099 today in exchange for $100,000 in 30 years? What would be the key considerations in answering yes or no? Would your answer depend on who is making the promise to repay?

Answer 1

Amount = Principal *(1+ return rate %)^n years

$100000=$24099*(1+r%)^30

r%=4.86%

There is no straightforward answer on whether I will say a yes or no. This is because it depends on several factors:

1) Expected inflation over next 30 years

2)The credit risk / history of the person/ entity who promises to pay

3) My opportunity cost over the next 30 years (what if I have another investment opportunity with better returns?)

4) Expected interest rates over the next 30 years

Yes, my answer would depend on who is offering this deal to me (their credit history and risk)