Interest rates in the economy are 8% per year for the one-year horizon and 10% per year for the two-year horizon.

You expect a cash flow of 500$ one year from know and another 500$ two years from now.

What is the present value of the cash flows you expect?

a.

892$

b.

818$

c.

779$

d.

1,000$

e.

912$

f.

876$

g.

899$

h.

867$