You will receive $2,000 on January 1st 2004, on January 1st in 2005 and January 1st...

You will receive $2,000 on January 1st 2004, on January 1st in 2005 and January 1st 2006. Which of the following expressions will calculate your value at time of January 1st 2004?

a

PV = $2,000[1.06]^-1 + $2,000[1.06]^-2 + $2,000[1.06]^-3

b

PV = $2,000[1.06]^1 + $2,000[1.06]^2 + $2,000[1.06]^3

c

PV = $2,000[1.06]^0 + $2,000[1.06]^1 + $2,000[1.06]^2

d

PV = $2,000 + $2,000[1.06]^-1 + $2,000[1.06]^-2

Expert Solution

Correct Option is D

Explanation

We need Value on 1st Jan 2004 , So we don't have to Pull back $2000 of Jan 1st 2004 . It will be as it is $2000.

We need to pull only 1st Jan 2005 and 2006 $2000 1 and 2 year Back .

Only Equation D satsify this .

jeff jeffy answered 2 years ago

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