Question

Present value calculation   Without referring to the pre programmed function on your financial calculator​, use the basic formula for present​ value, along with the given discount​ rate, r​, and the number of​ periods, n​, to calculate the present value of​ $1 in the case shown in the following table.  ​(Click on the icon here   in order to copy the contents of the data table below into a​ spreadsheet.) Opportunity​ cost, r Number of​ periods, n 17​% 9

Answer 1

Present value (PV) = Amount / (1 + r) ^ n where;

A = Amount. This will be $1 as specified in the question

r = Interest rate. We are assuming annual compounding. Hence this will be 17%

n = Period. This will be 9.

Hence PV will be: 1 / (1+17%)^9

= 1 / 1.17^9

= 0.243404

Hence PV of $1 at 17% over 9 years would be $0.243404

Happy Learning!