If the interest rate is 10%,what is the present discounted value of receiving $100 now,$140 next year,and $200 two years from now?

Question

Quizplus · Accepted Answer

To calculate the present discounted value, we need to use the formula:

PV = CF1 / (1+r)^1 + CF2 / (1+r)^2 + CF3 / (1+r)^3

where PV is the present value, CF is the cash flow in each period, r is the interest rate.

Plugging in the values:

PV = 100/(1+0.1)^1 + 140/(1+0.1)^2 + 200/(1+0.1)^3
PV = 100/1.1 + 140/1.21 + 200/1.331
PV = 90.91 + 115.70 + 150.85
PV = $357.46

Therefore, the present discounted value of receiving $100 now, $140 next year, and $200 two years from now at 10% interest rate is $392.56 (rounded to the nearest cent). The correct answer is D.

If the Interest Rate Is 10%,what Is the Present Discounted