In: Finance
If the present value of $149 is $135, what is the discount factor? If that $149 is received in year 5, what is the interest rate? I need help with the second part I understand the discount factor. I dont know how to set it up and solve
PV= FV/(1+r)T
PV=$135
FV=$149
T=5
135=149/(1+r)5
(1+r)5 = 1.103703 (discount factor)
1+r=(1.103703)1/5
1+r=1.0199303
r=1.993%