You will receive $100 in 1 year,$200 in 2 years,and $300 in 3 years.If you can earn 13% on your investments,the present value of these future receipts is ________.
A)$453
B)$512
C)$801
D)$600

Question

Quizplus · Accepted Answer

The present value of a future receipt is the amount of money that, if invested today at a given interest rate, would grow to the future receipt at the end of the specified period. To calculate the present value of the future receipts, we can use the formula:PV = FV / (1 + r)^nwhere:PV is the present valueFV is the future valuer is the interest raten is the number of yearsUsing this formula, we can calculate the present value of each future receipt:PV1 = $100 / (1 + 0.13)^1 = $88.49PV2 = $200 / (1 + 0.13)^2 = $154.94PV3 = $300 / (1 + 0.13)^3 = $211.57The total present value of the future receipts is the sum of the present values of each individual receipt:PV = PV1 + PV2 + PV3 = $88.49 + $154.94 + $211.57 = $455.00Therefore, the present value of the future receipts is $455.00, which is closest to choice A, $453.

You Will Receive $100 in 1 Year,$200 in 2 Years,and