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12 April, 13:36

Compute the present value of $1,500 paid in three years using the following discount rates: 5 percent in the first year, 6 percent in the second year, and 7 percent in the third year. (Do not round intermediate calculations. Round your answer to 2 decimal places.).

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  1. 12 April, 15:44
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    The present value of $1,500 paid in three years is $1259.54

    Explanation:

    A = P (1 + r/100) ^n

    where:

    A is the future value

    P is the present value

    r is the rate of interest

    n is the time period.

    1500 = P * (1.05) * (1.06) * (1.07)

    P = 1500/1.19091

    = $1259.54

    Therefore, The present value of $1,500 paid in three years is $1259.54
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