A business acquaintance promises to deliver a $20 bill to you one year from today. how much should you be willing to pay today for this promise?

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12-07-2017
Mathematics

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A business acquaintance promises to deliver a $20 bill to you one year from today. how much should you be willing to pay today for this promise?

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rubennayanga rubennayanga · Answer 1 · 2017-07-12T08:50:53+02:00

rubennayanga rubennayanga

12-07-2017

You need to consider the nominal interest rate in your country. The $20 value is the future value of the money you will be given. Therefore, you need to consider the interest rate to get the present value which is the amount that you should be willing to pay today for this promise.

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