Find the Present value (PV) of a $300 T-bill being held for one year (t=1), when...
Find the Present value (PV) of a $300 T-bill being held for one year (t=1), when the interest rate is 7% [1 mark] What is the present value if the same T-bill is being held for three years (t=3)? [1 mark]
Homework Answers
Answer - present value when held for 1 year = $280.37
Reason - Present value = Future value * present value discount factor, 7%, 1 year
= 300 * 0.93457943925
= 280.373831775 or $280.37 ( rounded off)
Answer - when held for 3 years = $244.89
Reason - Present value = Future value * present value discount factor, 7%, 3rd year
= 300 * 0.81629787688
= 244.889363064 or $244.89 ( rounded off )
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