Suppose you are offered the alternative ofreceiving either $3,000 at the end of five years orP dollars today. There is no question that the$3,000 will be paid in full (no risk). Because youhave no current need for the money, you wouldinvest the P dollars in business that pays 8% ormore profit.• What value of P would make you indifferent toyour choice between P dollars today and thepromise of $3,000 at the end of five years?

The value P is present worth of money or we can say value of money now, and the $3000 at the end of…

Answered: What value of P would make you…

What value of P would make you indifferent to your choice between P dollars today and the promise of $3,000 at the end of five years?

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter19: The Basic Tools Of Finance

Section: Chapter Questions

Problem 1CQQ

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