Present Value of Amounts Due

Tommy John is going to receive $240,000 in three years. The current market rate of interest is 13%.

a. Using the present value of $1 table in Exhibit 8, determine the present value of this amount compounded annually. Round to the nearest whole dollar. $__________

b. Why is the present value less than the $240,000 to be received in the future? The present value is less due to a. inflation b. the compounding of interest c. deflation over the 3 years.