You have just received a windfall from an investment you made in a friend's business. He will be paying you $17,752 at the end of this year, $35,504 at the end of the following year, and $53,256 at the end of the year after that (three years from today). The interest rate is 11.7% per year. a. What is the present value of your windfall? b. What is the future value of your windfall in three years (on the date of the last payment)? ... a. What is the present value of your windfall? The present value of your windfall is $ (Round to the nearest dollar.) b. What is the future value of your windfall in three years (on the date of the last payment)? The future value of your windfall in three years is $ . (Round to the nearest dollar.)
You have just received a windfall from an investment you made in a friend's business. He will be paying you $17,752 at the end of this year, $35,504 at the end of the following year, and $53,256 at the end of the year after that (three years from today). The interest rate is 11.7% per year. a. What is the present value of your windfall? b. What is the future value of your windfall in three years (on the date of the last payment)? ... a. What is the present value of your windfall? The present value of your windfall is $ (Round to the nearest dollar.) b. What is the future value of your windfall in three years (on the date of the last payment)? The future value of your windfall in three years is $ . (Round to the nearest dollar.)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:You have just received a windfall from an investment you made in a friend's business. He will be paying you $17,752 at the
end of this year, $35,504 at the end of the following year, and $53,256 at the end of the year after that (three years from
today). The interest rate is 11.7% per year.
a. What is the present value of
b. What is the future value of your windfall in three years (on the date of the last payment)?
your windfall?
a. What is the present value of
your windfall?
The present value of your windfall is $
(Round to the nearest dollar.)
b. What is the future value of your windfall in three years (on the date of the last payment)?
The future value of your windfall in three years is $
(Round to the nearest dollar.)
Expert Solution
Step 1
Money’s value declines with the passage of time due to various market factors like inflation rate. Compounding and discounting are two different techniques which consider the time value of money (TVM). Compounding is used to compute the future value (FV) of present cashflows and discounting is used to compute the present value (PV) of future cashflows.
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