Based on your findings in parts a and b discuss the effect, Ask an Expert

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You have a trust fund that will pay you $1 million exactly ten years from today. You want cash now, so you are considering an opportunity to sell the right to the trust fund to an investor.

a) What is the least you will sell your claim for if you earn the following rates of return on similar risk investments during the ten-year period?

1. 6%

2. 9%

3. 12%

b) Rework part (a) under the assumption that $1 million payment will be received in fifteen rather than ten years.

c) Based on your findings in parts (a) and (b), discuss the effect of both of the rate of return and the time until receipt of payment on the present value of a future sum.

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M942049

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