(a)
Calculate the present discounted value of $50,000, which is received 1 year from now.
(a)
Explanation of Solution
Present discounted value (x) of $50,000, which is received 1 year from now with 3% interest rate (R), is calculated as follows.
Substitute the respective values in Equation (1).
The present discounted value is $48,544.
(b)
Calculate the present discounted value of $50,000 received 10 year from now.
(b)
Explanation of Solution
Substitute the respective values in Equation (1) to calculate the present discounted value (x) of $50,000 received 10 years from now.
The present discounted value is $37,205.
(c)
Calculate the present discounted value of $100 every year, forever, starting immediately.
(c)
Explanation of Solution
The present discounted value of $100 every year, forever, is calculated as follows:
The present discounted value is $3,433.
(d)
Calculate the present discounted value of $100 every year, forever, starting 1 year from now.
(d)
Explanation of Solution
The present discounted value of $100 every year, forever, starting 1 year from now is calculated as follows:
The present discounted value is $3,333.
(e)
Calculate the present discounted value of $100 every year for the next 50 year, starting immediately.
(e)
Explanation of Solution
The present discounted value of $100 every year, forever, is calculated as follows:
The present discounted value is $2,643.
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Chapter 7 Solutions
Macroeconomics (Fourth Edition)
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