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1 March, 14:36

You have bought a house today at the price of $500,000. In the next two years, you will get a rent of $50,000 each year. In year 3, there is no rent income but you will sell the house at the price of $800,000. Suppose the discount rate (interest rate) is always 10% each year. What is the present value at time zero for the rent income at year 1

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  1. 1 March, 14:59
    0
    Present Value = $45,454.55

    Explanation:

    Giving the following information:

    You will get a rent of $50,000 each year.

    The discount rate is 10%.

    To calculate the present value at time zero of the first rent, we need to use the following formula:

    PV = FV / (1+i) ^n

    PV = 50,000 / (1.10) = $45,454.55
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Home » Business » You have bought a house today at the price of $500,000. In the next two years, you will get a rent of $50,000 each year. In year 3, there is no rent income but you will sell the house at the price of $800,000.
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