CONTENT:

Determination of PV Part I * Suppose your bank account will be worth $7,000.00 in one year. The interest rate (discount rate) that the bank pays is 8%. What is the present value of your bank account today? PV = C/ (1+i) t = 7,000/ (1+0.08)1= $ 6,481.48 What would the present value of the account be if the discount rate is only 3%? = 7000/ (1+0.03)1 =$ 6,796.12 * Suppose you have two bank accounts, one called Account A and another Account B. Account A will be worth $4,000.00 in one year. Account B will be worth $9,600.00 in two years. Both accounts earn 5% interest. What is the present value of each of these accounts? Account A PV = C/ (1+i) t = 4000/ (1+0.05)1 = 3,809.52 Account B PV = C/ (1+i) t = 9600/ (1+0.05)1 = $9,142.86 * PV = C/ (1+i) t I= 8% 1st year = 42,000,000/ (1+0.08)1 =$38,888,888.89 2nd year =62,000,000/ (1+0.08)2 =$53,155,006.86 3rd year =99,000,000/ (1+0.08)3 =$78,589,391.86 PV = C/ (1+i) t I= 6% 1st year = 42,000,000/ (1+0.06)1 =$39,622,641.51 2nd year =62,000,000/ (1+0.06)2 =$55,179,779.28 3rd year =99,000,000/ (1+0.06)3 =...