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23-01-2017
Mathematics

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Suppose that an investment will return a payoff of $220 after one year, plus another $484 after two years. what is the present discounted value of that investment if the interest rate is 10%?

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scme1702 scme1702

31-01-2017

Present value of $220 = 220 / 1.1
Present value of $220 = 200

Present value of $484 = 484 / 1.1²
Present value of $484 = $400

The net present value of the investment is: 200 + 400
= $600

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