Liam is considering putting money in an investment plan that will pay him $52,000 in 12 years. If Liam's opportunity cost rate is 7 percent compounded annually, what is the maximum amount he should be willing to pay for the investment today?
A)$23,089
B)$25,526
C)$26,888
D)$28,685
E)$30,534

Question

Quizplus · Accepted Answer

To find the maximum amount Liam should be willing to pay for the investment today, we use the present value formula: PV = FV / (1 + r)^n, where PV is the present value, FV is the future value ($52,000), r is the annual interest rate (7% or 0.07), and n is the number of years (12). Plugging in the values, we get PV = $52,000 / (1 + 0.07)^12, which calculates to approximately $23,089.

Liam Is Considering Putting Money in an Investment Plan That