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You have been offered an opportunity to receive $1,900 at the end of one year. You can earn a 5% rate of return on your
You have been offered an opportunity to receive $1,900 at the end of one year. You can earn a 5% rate of return on your next best alternative investment. How much are you willing to invest/deposit today (t=0) to have the opportunity to receive $1,900 at the end of one year, given that your interest rate is 5%? Draw a timeline to illustrate the problem. What is he present value of your investment?
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