Question

If the interest rate is 10%, what is the present value of a security that pays you $1,100 next year, sl 220 the year after, and S1338 the year after that? Present value is S(Round your response to the nearest penny)

Answer 1

I am assuming that by 'next year', it means begining of next year.

$PV = \frac{FV}{(1+I)^n}$

Where n is the number of years after which FV is received .

$PV = \frac{1100}{(1+0.1)^1} + \frac{1220}{(1+0.1)^2}+\frac{1338}{(1+0.1)^3}$

$PV = \frac{1100}{1.1} + \frac{1220}{ 1.21}+\frac{1338}{1.331}= 3013.52$