Time value Personal Finance Problem Jim Nance has been oflered an investment tha

Question

Time value Personal Finance Problem Jim Nance has been oflered an investment that will pay him $430 three years from today hbopporbrity cost 8% compounded annually, what value should he place on this opportunity today? b. What is the most he should pay to purchase this payment loday? ?. "Jim can purchase lhis in vestnent for less than the amount alot ted in part (a), what does that irrply about the rate of return h= he w? earn on the invedmern a. The vatue Jim should place on thes opportunity loday iss(Round to the nearest cant) b. The most he should pay to purchase this payment today is Round to the nearest cent C. If Jim pays less than $341.35 computed in part a for the investment, his rate of return will be the qportnty cost of 8% (Seed frornthe dog-down menu)

Explanation / Answer

a.] Present value = future value * 1/(1+rate)number of years

        = $430 * 1/(1+0.08)3

   = $430 * 1/(1.08)3

   = $430 * 1/1.259712

   = $341.35

b.] He should not pay more than $341.35 to purchase this investment at 8% of opportunity cost

c.]   exceed , if jims pays less than the $341.35 ,his return would exceed the opportunity cost of 8%

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