Ask Question
16 August, 16:10

The 2-year discount factor is 0.80. a. What is the present value of $1 to be received in year 2? (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. What is the present value of $2,850? (Do not round intermediate calculations.)

+2
Answers (1)
  1. 16 August, 18:39
    0
    Answer

    a. PV=$0.31

    b. PV=$879.63

    Step-by-step explanation:

    PV = F / [ (1 + r) ^n ]

    where

    PV = Present Value,

    F = Future payment (cash flow),

    r = Discount rate=0.80

    n = the number of periods in the future=2

    a. F=$1

    PV = 1/[ (1 + 0.8) ^ 2]

    =1 / [1.8]^2

    =1/3.24 = $0.31

    b. F=$2,850

    PV = 2850/[ (1 + 0.80) ^ 2]

    =2850 / [1.8]^2

    =2850 / 3.24

    =$879.63
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “The 2-year discount factor is 0.80. a. What is the present value of $1 to be received in year 2? (Do not round intermediate calculations. ...” in 📙 Mathematics if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers