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2. The following are exercises in present values: a. $100 at the end of three years is worth how much today, assuming a discount rate of (i) 100 percent? (ii) 10 percent? (iii) 0 percent?

2. The following are exercises in present values: a. $100 at the end of three years is worth how much today, assuming a discount rate of (i) 100 percent? (ii) 10 percent? (iii) 0 percent?

PFIN (with PFIN Online, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
PFIN (with PFIN Online, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
6th Edition
ISBN:9781337117005
Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Chapter2: Using Financial Statements And Budgets
Section: Chapter Questions
Problem 5FPE
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2. The following are exercises in present values: a. $100 at the end of three years is worth how much today, assuming a discount rate of (i) 100 percent? (ii) 10 percent? (iii) 0 percent? b. What is the aggregate present value of $500 received at the end of each of the next three years, assuming a discount rate of (i) 4 percent? (ii) 25 percent? C. $100 is received at the end of one year, $500 at the end of two years, and $1,000 at the end of three years. What is the aggregate present value of these receipts, assuming a discount rate of (i) 4 percent? (ii) 25 percent? d. $1,000 is to be received at the end of one year, $500 at the end of two years, and $100 at the end of three years. What is the aggregate present value of these receipts assum- ing a discount rate of (i) 4 percent? (ii) 25 percent? e. Compare your solutions in Part (c) with those in Part (d) and explain the reason for the differences.
Transcribed Image Text:2. The following are exercises in present values: a. $100 at the end of three years is worth how much today, assuming a discount rate of (i) 100 percent? (ii) 10 percent? (iii) 0 percent? b. What is the aggregate present value of $500 received at the end of each of the next three years, assuming a discount rate of (i) 4 percent? (ii) 25 percent? C. $100 is received at the end of one year, $500 at the end of two years, and $1,000 at the end of three years. What is the aggregate present value of these receipts, assuming a discount rate of (i) 4 percent? (ii) 25 percent? d. $1,000 is to be received at the end of one year, $500 at the end of two years, and $100 at the end of three years. What is the aggregate present value of these receipts assum- ing a discount rate of (i) 4 percent? (ii) 25 percent? e. Compare your solutions in Part (c) with those in Part (d) and explain the reason for the differences.
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