Question

Present value for various discounting periods

Find the present value of $600 due in the future under each of these conditions:

A) 13% nominal rate, semiannual compounding, discounted back 7 years. Round your answer to the nearest cent. $______

B) 13% nominal rate, quarterly compounding, discounted back 7 years. Round your answer to the nearest cent. $ _______

C) 13% nominal rate, monthly compounding, discounted back 1 year. Round your answer to the nearest cent.

$ _______

Why do the differences in the PVs occur?

A) The Present Values decline as periods per year increase

B) The Present Values decline as periods per year decrease

C) The Present Values increases as periods per year increase

D) The present values are not affected by changes in the number of periods per year

E) The present values are positively related to the number of discounting periods per year

Answer 1