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2010-02-23_034032_TVM

# 2010-02-23_034032_TVM - 3 You will receive \$5,000 three...

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3. You will receive \$5,000 three years from now. The discount rate is 8 percent. a. What is the value of your investment two years from now? Multiply \$5,000 _ .926 (one yearÂ’s discount rate at 8 percent). \$5,000 x .926 = \$4,630 b. What is the value of your investment one year from now? Multiply your answer to part a by .926 (one yearÂ’s discount rate at 8 percent). \$4,630 x .926 = \$4,287 c. What is the value of your investment today? Multiply your answer to part b by .926 (one yearÂ’s discount rate at 8 percent). \$4,287 x .926 = \$3,970 d. Confirm that your answer to part c is correct by going to Appendix B (present value of \$1) for n _ 3 and i _ 8 percent. Multiply this tabular value by \$5,000 and compare your answer to part c. There may be a slight difference

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