How much money would you have to deposit today in order to have
$2,000 in three years if the discount rate is 6 percent per year?
(Do not round intermediate calculations. Round your answer
to 2 decimal places. (e.g., 32.16))
what is the amonunt of deposit ??
Amount to be deposited today is the present value of $2,000 receivable three years from now discounted at 6%
Present value factor
= 1 / (1 + r) ^ n
Where,
r = Rate of interest = 6% or 0.06
n = Years = 3
So, Present value factor
= 1 / (1.06^3)
= 1 / 1.191016
= 0.839619
So, present value
= Future value x Present value factor
= $2,000 x 0.839619
= $ 1,679.24
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