Question

What is the PV of $100 received in year 10 (at a discount rate of 1%)? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

  

Present value

$

  

b.	What is the PV of $100 received in year 10 (at a discount rate of 13%)? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

  

Present value

$

  

c.	What is the PV of $100 received in year 15 (at a discount rate of 25%)? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

  

Present value

$

  

d.	What is the PV of $100 received in each of years 1 through 3 (at a discount rate of 12%)? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

  

Present value

$

Answer 1

(a)

• Future value = $100
• Number of years 'n' = 10
• Discount rate 'r' = 1%
• PVF = 1 ÷ (1 + 0.01)¹⁰ = 0.90528695465
• PV = $100 × 0.90528695465 = $90.53

(b)

• Future value = $100
• Number of years 'n' = 10
• Discount rate 'r' = 13%
• PVF = 1 ÷ (1 + 0.13)¹⁰ = 0.2945883481
• PV = $100 × 0.2945883481 = $29.46

(c)

• Future value = $100
• Number of years 'n' = 15
• Discount rate 'r' = 25%
• PVF = 1 ÷ (1 + 0.25)¹⁵ = 0.03518437208
• PV = $100 × 0.03518437208 = $3.52

(d)

In this case, $100 is received in each of years 1 through 3. These are annuity payments.

Present value of annuity = Annuity × Present Value Annuity Factor (PVAF)

Annuity = $100

• PV = $100 × 2.40183126819 = $240.18