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MOD 2 CaseFIN[1]

# MOD 2 CaseFIN[1] - Present Value Present Value Rodney...

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Present Value 1 Present Value Rodney Buckmire FIN 301 – Principles of Finance Module 2 Case Assignment

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Present Value 2 Part I: Calculation of present value. A. Suppose your bank account will be worth \$15,000.00 in one year. The interest rate (discount rate) that the bank pays is 7%. What is the present value of your bank account today? What would the present value of the account be if the discount rate is only 4%? \$15000 = total value in 1 year \$15000 = total value in 1 year (7% or 0.07 x 1year) = 0.07 (4% or 0.04 x 1year) = 0.04 1+ (0.07) = 1.07 1+ (0.04) = 1.04 \$15000 / 1.07 = \$14,018.69 \$15000 / 1.04 = \$14,423.08 PV= \$14018.69 PV=\$14,423.08 B. Suppose you have two bank accounts, one called Account A and another Account B. Account A will be worth \$6500.00 in one year. Account B will be worth \$12,600.00 in two years. Both accounts earn 6% interest. What is the present value of each of these accounts? \$6500 = total value in 1 year
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MOD 2 CaseFIN[1] - Present Value Present Value Rodney...

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