The graph shows the discounted value of $1 over time. Move the slider to change the compound interest rate and observe how the curve for the present value of $1 changes. The red dotted cursor lines show the present value of $1 at a specific time period in the future. Drag on the graph to select different time periods. Present Value of $1 1.0 0.86 0.8 0.6- 04- 0.2- 0.0- PVN = FV = = (1+ 0 4 6 1 (1+1)N 8 (1+0.050) 3.0 = 1.16 = $0.86 10 2 12 14 16 18 20 Periods

The graph shows the discounted value of $1 over time. Move the sider to change the compound interest rale and observe how the curve for the present value of $1 changes. The red dotted cursor lines show the present valuo of 51 at a spectic time period in the future. Orag on the graph to seloct difterent time periods PVN=FVN1=(1+I)V1=(1+0.050)301=1.161=$0.86 1. What is the present value of 51 due in 3 years when the discount interest rote is 10% ? a. 51.33 b. 51.00 c. 50.75 d. 50.10 2. How much is each 51 due in 14 years at a discount rate of 5% worth todsy? a. 50.66 b. 10.51 C $1.98 d. $1.00 3. Bond Long will pay 11 In 20 years with a discount interest rate of 5% and Bond Short will pay 51 in 5 years with a discount interest rate of 10 . Which bond has the higher present value? a. Long greater than Short b. Shart greater than Long c. Long and short have same present value d. Not enough information to determine PVN=FVN1=(1+I)N1=(1+0.050)3.01=1.161=$0.86