Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

What is the present value of $1,000 due in 17 years at a 5 percent interest rate and 11 percent interest rate? Do not round

What is the present value of $1,000 due in 17 years at a 5 percent interest rate and 11 percent interest rate? Do not round intermediate calculations. Round your answers to the nearest cent.

Present value at 5%: $ ______

Present value at 11%: $ ______

Explain why the present value is lower when the interest rate is higher.

  1. The less interest you can earn during an investment period, the less you need to invest today to receive a particular amount in the future.
  2. The more interest you can earn during an investment period, the less you need to invest today to receive a particular amount in the future.
  3. The more interest you can earn during an investment period, the more you need to invest today to receive a particular amount in the future.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Equity Valuation Risk And Investment A Practitioners Roadmap

Authors: Peter C. Stimes

1st Edition

0470226404, 9780470226407

More Books

Students also viewed these Finance questions