Tommy John is going to receive $1,000,000 in three years. The current market rate of interest is 10%.a. Using the present value of $1 table in Exhibit 8, determine the present value of this amount compounded annually.b. Why is the present value less than the $1,000,000 to be received in the future?
Tommy John is going to receive $1,000,000 in three years. The current market rate of interest is 10%.a. Using the present value of $1 table in Exhibit 8, determine the present value of this amount compounded annually.b. Why is the present value less than the $1,000,000 to be received in the future?
Chapter5: The Time Value Of Money
Section: Chapter Questions
Problem 16P
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Tommy John is going to receive $1,000,000 in three years. The current market rate of interest is 10%.
a. Using the present value of $1 table in Exhibit 8, determine the present value of this amount compounded annually.
b. Why is the present value less than the $1,000,000 to be received in the future?
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