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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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