Assume your uncle will pay you $100 for each of the next two years and $200 in years 3 and these amounts will be paid at year end.Assume the interest rate is 10% for the first two years and 12% for the next two (years 3 and 4).What is your uncle's promise worth in today's dollars? (Round your answer) A)$317 B)$342 C)$453 D)$512 E)$600 100 (PVAnnuity_2,10%) + 200 (PVAnnuity_2,12%)((PV_2,10%) 100 (1.7355) + 200 (1.6901)(.8264)

Question

Quizplus · Accepted Answer

First we need to calculate the present value of the cash flows using the appropriate discount rates for each period.

PV(year 1): 100/(1+0.10)^1 = 90.91 
PV(year 2): 100/(1+0.10)^2 = 82.64 
PV(year 3): 200/(1+0.12)^3 = 150.76

Total PV = 90.91 + 82.64 + 150.76 = $324.31

Therefore, your uncle's promise is worth $324.31 in today's dollars. The closest answer choice is C: $453.

Assume Your Uncle Will Pay You $100 for Each of the Next