You will receive $8,800 three years from now. The discount rate is 10 percent. a

Question

You will receive $8,800 three years from now. The discount rate is 10 percent. a What is the value of your investment two years from now? Multiply $8,800 x .909 (one year's discount rate at 10 percent). (Round your answer to 2 decimal places.) Value of investment b. What is the value of your investment one year from now? Multiply your rounded answer to part a by .909 (one year's discount rate at 10 percent). (Round your answer to 2 decimal places.) Value of investment What is the value of your investment today? Multiply your rounded answer to part b by .909 (one year's discount rate at 10 percent. Round your answer to 2 decimal places.) Value of investment d Confirm that your answer to part c is correct by going to the link provided below (present value of $1) for n 3 and i= 10%. Multiply this tabular value by $8,800 and compare your answer to part c. There may be a slight difference due to rounding. Use Appendix B. (Round your answer to 2 decimal places.) Present value e. Now compute the present value of $8,800 for 3 years at 10 percent using the formula and financial calculator methods. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Present value

Explanation / Answer

Value of investment after 3 years 8800 a. Value after two years 8800*.909 $8,000 The value of investment after 2 years will be $ 8000 b. Value after one year 8000*.909 7272 The value after one year from now will be $ 7272 c Value as on today 7272*.909 6610.248 The value will be $ 6610 d PV = FV/(1+r)n PV = 8800/(1.1)3 8800*.751 $6,611.57 The value will be $ 6611.57

Related Questions

Navigate

• Browse (All)
• Browse Y
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.