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2. P5-12: Present value concept: Answer each of the following questions. a. What single investment made today, earning 12% annual interest, will be

2. P5-12: Present value concept:

Answer each of the following questions.

a. What single investment made today, earning 12% annual interest, will be worth $6,000 at the end of 6 years?

b. What is the present value of $6,000 to be received at the end of 6 years if the discount rate is 12%?

c. What is the most you would pay today for a promise to repay you $6,000 at the end of 6 years if your opportunity cost is 12%?

d. Compare, contrast, and discuss your findings in parts a through c.
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Dear Student Please find... View the full answer

Finance-8196268.xls

SOLUTION:
a. Future Value
Rate
N $6,000.00
12.00%
6.00 Future Value = Present Value * (1 + Rate) ^ n
$6,000 = Present Value * (1 + 12%) ^ 6
Present Value b. $3,039.79 Present Value = Future Value *...

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