Discount rate. Future Bookstore sells books before they are published. Today, they are offering the...
Discount rate. Future Bookstore sells books before they are published. Today, they are offering the book Adventures in Finance for $12.15, but the book will not be published for another 4 years. The retail price when the book is published will be $23. What is the discount rate Future Bookstore is offering its customers for this book?
Homework Answers
| Price after 4 years | 23 | ||||
| Price offered today | 12.15 | ||||
| (this is present value of $ 23) | |||||
| PVf for 4 th year (12.15/23) | 0.52826 | ||||
| Rate at which PV factor arises at 4th year is 17.30% | |||||
| Therefore, Discount rate = 17.30% | |||||
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