im 1509936069187,-aB i 5. Introduction to the present value of money Aa Aa Under
ID: 2781557 • Letter: I
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im 1509936069187,-aB i 5. Introduction to the present value of money Aa Aa Under the concepts of the time value of money, you can determine the current, or present, value of a cash receipt or payment that will occur at some specified time in the future, given a specified rate of interest. This technique can b used to calculate the present value of a single or a series of future receipts or payments Dakota and Gabriella are walking after class between the library and the best pizzeria near campus. They're discussing Dr. Phillips's latest financial management lecture, which addressed the concept of present value and the process for calculating it. In anticipation of tomorrow's quiz, they've decided to review their lecture notes and the textbook materials and then practice one or two problems. Complete the missing information in the conversation that follows. Round your final answer to all computations to two decimal places. However, if you compute any interest factors as an intermediate step in your calculations, round them to four decimal places. Gabriella So, what is a present value, and why is it important to be able to calculate it? value is the current valu Dakota According to Dr. Phillips, an asset's present or 58:48 Timeout cash flows that it will pay or receive in the future. oe@e o AY HUB TECH- Type here toExplanation / Answer
Missing blanks :
1) time value
2) scenario 2 is to be used for future value calculations. Scenario 1 requires the calculation of present value because the amount to be deposited today is required to be calculated.
3) divisor
Homework problem :
1) present as $22,500 is the future amount
2) PV= FV / (1+(i/n))nt
I = interest rate
N= No. Of compounding periods
T= number of years
PV= 22500/(1+0.09/1)1×3
= $17,374.13 or $17,374
This amount is required to be deposited now to earn 22,500 in three years.
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