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Old 02-14-2013, 05:20 PM
hope hope is offline
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Default Please help I have an exam very soon

Hello everyone,
I am taking this finance class and facing some difficulties with couple of things. Please help me so that I can study for the exam.

1- Create a 3-year present value table assuming a 9% discount rate. What values in order (Year 1 -3) are correct?


2- Your father offers to buy you a car in 3 years. He will give you $2,000 at the end of the first year; $3,000 at the end of the second year; and $5,000 at the end of the third year. Using only the tables in question 7 (no calculator), and a 9% discount rate, what is the present value of your fatherís offer?


3- You expect to receive an inheritance of $10,000 in ten years. Assuming that you can receive your money today at a 7% or 9% discount rate, which discount rate would you prefer?


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Old 03-17-2013, 02:12 AM
abc201879456 abc201879456 is offline
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Default Re: Please help I have an exam very soon

answer 1:Present value(PV)=Cash flow at end of year 1/(1+ discount rate)^(no of years) + Cash flow at end of year 2/(1+ discount rate)^(no of years) +Cash flow at end of year 3/(1+ discount rate)^(no of years)

answer 2:PV=2000/(1+0.09)+3000/(1+0.09)^2+5000/(1+0.09)^2=1834.86+2525.039+3860.917=8220.81

Answer 3:7% as lower the discount rate more money you will get at start
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Old 04-01-2013, 07:40 AM
richardberry134 richardberry134 is offline
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Default Re: Please help I have an exam very soon

You can solve the problem though the net. All problem solution are available on the net.
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