Compute the present value of $1,500 paid in three years using the following discount rates: 5 percent in the first year, 6 percent in the second year, and 7 percent in the third year. (Do not round intermediate calculations. Round your answer to 2 decimal places.).

Question

Mueller

Business

15 November, 07:56

Compute the present value of $1,500 paid in three years using the following discount rates: 5 percent in the first year, 6 percent in the second year, and 7 percent in the third year. (Do not round intermediate calculations. Round your answer to 2 decimal places.).

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Answers (1)

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Mila Turner · Answer 1

The present value of $1,500 paid in three years is $1259.54

Explanation:

A = P (1 + r/100) ^n

where:

A is the future value

P is the present value

r is the rate of interest

n is the time period.

1500 = P * (1.05) * (1.06) * (1.07)

P = 1500/1.19091

= $1259.54

Therefore, The present value of $1,500 paid in three years is $1259.54