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Managerial Economics 12th Edition by Christopher Thomas,Charles Maurice
Edition 12ISBN: 978-0078021909Managerial Economics 12th Edition by Christopher Thomas,Charles Maurice
Edition 12ISBN: 978-0078021909 Exercise 1
Using a discount rate of 6.5 percent, calculate the present value of a $1,000 payment to be received at the end of
a. One year
b. Two years
c. Three years
a. One year
b. Two years
c. Three years
Explanation
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Given information
Compute Future value of $1,000 for three different time period at a discount rate of 6.5%.
Where,
r = discount rate and n = time period
a.
For a time period of one year, the present value of $1,000 would be:
Thus, Present value is equal to $938.97.
b.
A payment of $1,000 which would be received at the end of two years would have a present value equal to:
Thus, Present value is equal to $881.66.
c.
A payment of $1,000 which would be received at the end of three years would have a present value equal to:
Thus, Present value is equal to $827.85.
Compute Future value of $1,000 for three different time period at a discount rate of 6.5%.
Where,r = discount rate and n = time period
a.
For a time period of one year, the present value of $1,000 would be:
Thus, Present value is equal to $938.97.b.
A payment of $1,000 which would be received at the end of two years would have a present value equal to:
Thus, Present value is equal to $881.66.c.
A payment of $1,000 which would be received at the end of three years would have a present value equal to:
Thus, Present value is equal to $827.85.
Managerial Economics 12th Edition by Christopher Thomas,Charles Maurice
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