Uuiz 5a 5 of Money Chapter Tlme Value Time Remain 02 07 50 Q

Uuiz 5a 5 of Money Chapter Tlme Value Time Remain 02 07 50 Question: 6 pts 1 of 11 (0 complete) This Quiz: 59 pls p Present value concept Answer each of the tollowing questions a what s ng invest ent made today, earning 14%an aine est wil be worth $5,800 at the end of 3 years? b. What is the present value ors5800 to be received at the end of 3 years if the discount rate is 14%? hat is the most you would pay today for a promise to repay you $5,800at the end of 3 years if your opportunity cost is 14%? dCompare, contrast, and discuss your findings in part a through c A single investment made today, earning 14% annual interest, worth S5 800 at the end of 3 years is s (Round to the nearest cent) b. The present value of $5.800 to be received at the end of 3 years, ifthe discount rate is 14%, iss() (Round to the nearest cent) c. The most you would pay today for a promise to repay you S5.800 at the end of 3 years if your opportunity cost is 14% is S (Round to the nearest cent d. Compare, contrast, and discuss your findings in part a through c. (Select all answers that apply) A. In all three cases, the answer is $3.914 83. in part a, tis the payment, PMT. In part b, tis the present value, PV. in part c, it is the future value, FV. B. The annual interest rate is also called the discount rate or the opportunity cost C. In all three cases, you are solving for the present value, PV, which is $3,914.83 ?D. inparts a and c ss,800 is the Mure value, FV In part bS5 800 is the present value, PV Therefore, parts a and C have the same answer, while part b has a different answer ck to select your answers)

Solution

a.)

annual rate r= 14%

Single Investment made today = P

Future value = $5800

FV = P * (1+r)ⁿ

5800 = P * (1+0.14)³ = P * 1.481544

P = 5800/1.481544 = $3914.83

b.)FV = $5800, n = 3, Discount rate r= 14%

FV = PV * (1+r)ⁿ

PV = $3914.83

c.) promise to repay at future, FV = $5800, n = 3, opportunity cost = 14%

FV = PV * (1+r)ⁿ

Need to pay today = $3914.83

d.)

Answer: B & C