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2 years ago

Terry is calculating the present value of a bonus he will receive next year. The process he is using is called:

Business

1 answer:

MArishka [77]2 years ago

3 0

The process used by Terry is known as Discounting.

<h3>What is Discounting?</h3>

A value obtained in the future is converted to an equivalent value received right away through the process of discounting.
Discounting takes into account the relative value of a dollar received now against one received in 50 years, for instance.
By converting future dollars into current dollars, the discounting process allows for the conversion of units of value over a range of time periods.
Decision-makers utilize discounting to fully comprehend the costs and benefits of policies that have long-term effects.

Discounting is a method for calculating the gap between current and future values.

Know more about Discounting with the help of the given link:

brainly.com/question/14954197

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3 years ago

Suppose you enter into a 9-month long forward contract on a non-dividend-paying stock when the stock price is S0 = $125 and the

Vladimir79 [104]

Answer:

Future Price

F0: 126.89

F3: 113.13

F4: 113.41

Value of the contract:

a) zero (by definition)

b) -13

c) -13

Explanation:

forward price:

$F = S (1+r)^{n}$

being S the spot rate

time 9 months and

rate 2% continuous componding

As the rate is continuous we calculate using the e number instead:

$F = S e^{rn} +cost$

$F = 125 e^{0.02 \times 9/12}$

F = 125 x 1.015113065

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3th month into the contract:

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4th month

$F = 112 e^{0.025 \times 5/12}$

F = 113.4087866 = 113.41

value of the contract

at third month:

Vt = St - F0

Vt = 112 - 125 = -13

at fourth month

Vt = 112 - 125 = -13

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3 years ago

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Answer:

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