Suppose an investment will yield $1,000 after one year and $2,000 after two years.The present value of this investment at a discount rate of 8 percent is _____

Question

Quizplus · Accepted Answer

To calculate the present value, we need to discount the future cash flows back to the present using the formula:

Present Value = Future Value / (1 + r)^n

Where r is the discount rate and n is the number of years.

Using this formula, we can find the present value of the investment as follows:

PV = 1000/(1+0.08)^1 + 2000/(1+0.08)^2
   = 925.93 + 1714.67
   = $2,640.60

Therefore, the present value of the investment at a discount rate of 8 percent is $2,640.60, option B.

Suppose an Investment Will Yield $1,000 After One Year and $2,000