Question

Problem 3-6 Suppose the risk-free interest rate is 4% a. Having $200 today is equivalent to having what amount in one year? b. Having S200 in one year is equivalent to having what amount today? c. Which would you prefer, $200 today or S200 in one year? Interest rate 4.00% a. Having $200 today is equivalent to having what amount in one year? Amount today $200.00 Value in 1 year b. Having $200 in one year is equivalent to having what amount today? Amount in 1 year S200.00 Value today c. Which would you prefer, $200 today or $200 in one year? I would prefer $200

Answer 1

Calculate the future value as follows: |A -N(496,1,200) Function Arguments FV Rate 4% Nper 1 Pmt I = 0.04 number Pv -200 Type til = number 208 Returns the future value of an investment based on periodic, constant payments and a constant interest rate. is the present value, or the lump-sum amount that a series of future payments is worth now. If omitted, Pv 0 Pv Formula result208 OK Cancel Therefoere, the future value is $208