How much would you pay for the right to receive $80 at the end of 10 years if you can earn 15 percent interest?

The current worth of future money flows refers back to the quantity that might have to be invested right now with a view to obtain a specific amount sooner or later sooner or later – whether or not that’s one week, one yr, and even ten years from now. On this case, you’re in search of how a lot you would wish to pay right now with a view to obtain $80 on the finish of 10 years incomes 15% curiosity. To calculate this, you need to use the system PV = FV / (1 + r)^n the place PV is the current worth, FV is the long run worth (the $80), r is the speed of return (15%), and n is the variety of durations being thought of (10). Plugging these numbers into our equation yields: PV = 80/(1+0.15^10) = 38.48. So, you would wish to pay $38.48 right now to ensure that your funding develop over time and yield an anticipated return of $80 after 10 years with 15% curiosity compounded yearly.