Problem

Present value calculations—effects of compounding frequency, discount rates, and time peri...

Present value calculations—effects of compounding frequency, discount rates, and time periods Using a present value table, your calculator, or a computer program present value function, verify that the present value of $100,000 to be received in five years at an interest rate of 16%, compounded annually, is $47,610. Calculate the present value of $100,000 for each of the following items (parts a-f ) using these facts, except

a. Interest is compounded semiannually.


b. Interest is compounded quarterly.


c. A discount rate of 12% is used.

d. A discount rate of 20% is used.


e. The cash will be received in three years.


f. The cash will be received in seven years.

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