Question

is based on the notion that a dollar paid in the future is less valuable than a dolar paid today The present value of a loan in which $1000 is to be paid out a year from today with the intere ostrato equal to 4% is (Round your response to the nearest two decimal place) If a loan is paid after two years, and the amount $3000 is to be paid then with a corresponding 4% interest rate, the present value of the loan is $ (Round your response to the neareast two decimal place)

Answer 1

first part:

Present value is based on the notion that a dollar paid in the future is less valuable than a dollar paid today.

second part:

the present discounted value of a loan in which $1000 is to be paid out a year from today with the interest rate equal to 4% is $.961.54.

working:

present value = amount / (1+r)^n

=>1000/(1.04)^1

=>$961.54.

third part:

if a loan is paid after two years and the amount $3000 is to be paid with a corresponding 4% interest rate, the present value of the loan is $2,773.67.

working:

present value = amount/(1+r)^n

=>3000/(1.04)^2

=>$2,773.67.