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netineya [11]
3 years ago
5

If the interest rate this year is 8.8% and the interest rate next year will be 10.8%, what is the future value of $1 after 2 yea

rs? What is the present value of a payment of $1 to be received in 2 years?
Business
1 answer:
Nadusha1986 [10]3 years ago
6 0

Answer:

Results are below.

Explanation:

Giving the following information:

The interest rate this year is 8.8% and the interest rate next year will be 10.8%.

<u>a) To calculate the future value, we need to use the following formula:</u>

FV= PV*(1+i)^n

FV1= 1*1.088= 1.088

FV2= 1.088*1.108=$1.206

<u>b) To calculate the present value, we need to use the following formula:</u>

PV=FV/(1+i)^n

PV2= 1/1.108= 0.903

PV1= 0.903/1.088= $0.83

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Explanation:

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The formula is:

             n

<h3>NPV= ∑ [Rt/(1+i)^t] - I0</h3>

            t-1

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