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5 May, 20:44

You expect to receive a payment of $600 one year from now. Answer the following questions and show your calculations:

A. The discount rate is 6%. What is the present value of the payment to be received?

B. Suppose that the discount rate rises to 7%. What is the present value of the payment to be received? C. What will cause the present value of a future payment to decline?

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Answers (1)
  1. 5 May, 23:16
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    Instructions are below.

    Explanation:

    Giving the following information:

    You expect to receive a payment of $600 one year from now.

    A) Discount rate = 6%

    We need to use the following formula:

    PV = FV / (1+i) ^n

    PV = 600 / (1.06) = $566.04

    B) Discount rate = 7%

    PV = 600 / (1.07) = $560.75

    C) The future value of a certain cash flow declines when the interest rate (discount rate) increases or "n" (time) increases.
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Home » Business » You expect to receive a payment of $600 one year from now. Answer the following questions and show your calculations: A. The discount rate is 6%. What is the present value of the payment to be received? B. Suppose that the discount rate rises to 7%.
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