If $ 9 comma 000 is invested in a certain business at the start of the year, the investor will receive $ 2 comma 700 at the end of each of the next four years. What is the present value of this business opportunity if the interest rate is 6 % per year?

PV = $9,355.78

Explanation:

Giving the following information:

If $ 9,000 is invested in a certain business at the start of the year, the investor will receive $ 2,700 at the end of each of the next four years.

Interest rate = 6%.

First, we need to find the final value

FV = {A*[ (1+i) ^n-1]}/i

A = payment

FV = {2,700*[ (1.06^4) - 1]}/0.06 = 11,811.46

Now, we calculate the present value:

PV = FV / (1+i) ^n

PV = 11,811.46/1.06^4 = $9,355.78