Question

Compute the present value of $1,150 paid in three years using the following discount rates: 6 percent in the first year, 7 percent in the second year, and 8 percent in the third year. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Answer 1

Present Value

Present Value = Future Value / (1 + r1) x (1 + r2) x (1 + r3)

= $1,150 / (1 + 0.06) x (1 + 0.07) x (1 + 0.08)

= $1,150 / (1.06 x 1.07 x 1.08)

= $1,150 / 1.224936

= $938.82

“Hence, the Present Value will be $938.82”