Your business associate who owes you $12000 offers to pay you either $10080 now or else to pay you 8 yearly installments of $1500, the first installment paid now. Assume a 5.9% market interest rate, compounded continuously. How much would you have at the end of 8 years if you choose to take the $ 10080 offer now, and you use the market to earn interest on the funds?
At the end of 8 years, you would have $14,945.45 if you choose to take the $10080 offer now and use the market to earn interest on the funds. This is calculated using the formula A = P(1 + r/n)^nt, where A is the amount at the end of 8 years, P is the principal (the $10080 offer now), r is the market interest rate (5.9%), n is the number of times the interest is compounded (continuously), and t is the number of years (8).
