Question

An investment will pay $ 287 comma 280 at the end of next year for an investment of $ 190 comma 000 at the start of the year. If the market interest rate is 8​% over the same​ period, should this investment be​ made?

Answer 1

Answer:

Yes

Explanation:

Given that

Present value = $190,000

Future value = $287,280

Market interest rate = 8%

So to find out this investment should be made or not we have to calculate the percentage returns on investment that is equal to

= Future Value ÷ Present Value - 1

= $287,280 ÷ $190,000 - 1

= 51.20%

Since the investment return is more than the market interest rate so this investment should be made