A company invests P10,000 today to be repaid in five years in one lump sum at 12% compounded annually. If the rate of inflation is 3% compounded annually, how much profit in present day pesos is realized over five years?
FV=PV×(1+i)^t FV=10,000×(1+0.12)
5=10,000×1.7623=17,623
Then, real value for present day pesos
Real Value (RV)=Future Value (FV)/(1+future interest)^t
RV=17,623/(1+0.03)^5=17,623/1.1593≈15,203.94
FV=PV×(1+i)^t FV=10,000×(1+0…
FV=PV×(1+i)^t
FV=10,000×(1+0.12)
5=10,000×1.7623=17,623
Then, real value for present day pesos
Real Value (RV)=Future Value (FV)/(1+future interest)^t
RV=17,623/(1+0.03)^5=17,623/1.1593≈15,203.94