# Calculating the present value of an investment

You must choose between two passive investments.

Investment A requires an initial investment of $50,000 but will return $71,000 in three years.

Investment B requires an initial investment of $45,000 but will return $60,000 in two years.

You choose a discount rate of 10% to make your decision.

What is the present value of each investment?

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#### Solution Preview

The question is asking how much you would have to invest at 10% interest to receive the given payoffs in the given number of years.

The formula for the future value of an ...

#### Solution Summary

This solution give the the formula for the present value of an investment and gives two examples of how to apply it.

$2.19