Score: 0 of 5 pts 2 of 6 (0 complete) HW Score: 0%, 0 of 30 pts P3-10 (similar t

Question

Score: 0 of 5 pts 2 of 6 (0 complete) HW Score: 0%, 0 of 30 pts P3-10 (similar to Question Help Present value (with changing interest rates). Marty has been offered an injury settlement of $8,00 payable in 4 years. He wants to know what the present value of the injury settlement is if his opportunity cost is 3.5%. ( 10% The opportunity cost is the interest rate in this problem.) What if the opportunity cost is 75%? What if it is Marty's opportunity cost is 3.5%, what is the present value of the inury settlement? (Round to the nearest cent.)

Explanation / Answer

Present Value at 3.5% = $       8,000 x (1.035^-4) = $ 6,971.54 Present Value at 3.5% = $       8,000 x (1.075^-4) = $ 5,990.40 Present Value at 3.5% = $       8,000 x (1.10^-4) = $ 5,464.11

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