Question

In: Finance

The present value of $200 due in 2 years at a discount rate of 7.5%.

The present value of $200 due in 2 years at a discount rate of 7.5%.

Solutions

Expert Solution

Present Value of future value of money is calculated as follows:
Present Value = Future Value * Discount factor
= $200.00 * 0.865332612
= $173.07
Working:
Discount factor = (1+i)^-n Where,
= (1+0.075)^-2 i = 0.0750
= 0.865332612 n = 2
Alternatively,
Present Value =-PV(rate,nper,pmt,fv) Where,
= $173.07 rate = 0.0750
nper = 2
pmt = 0
fv = $200.00

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