value of 125000 6 months from now
= 125000(1.00416666...)^6
= 128157.73
Pr value of 135000
x(1.00416666..)^6 = 135000
x = 131673.68
So both solutions show that he should take the 135000 six months from now.
At he present time, the difference is worth
= 131673.68 - 125000
$ 6673.68
Six months from now the difference is worth
135000 - 128157.73 =6842.27
notice that
6673.68(1.00416666..)^6 = 6842.27
. Richard Simons is selling his house. He has a choice of taking $125,000 today or $135,000 in 6 months. If he takes the money today, he can invest it at Valley Bank at 5% interest compounded monthly.How much would the 125,000 be worth in six months if invested?Which offer should he take? Why? How much more money does he gain in
making this choice?
1 answer
1 answer