A painting is currently worth $100,000,and is expected to maintain its real value for three years.The real interest rate is expected to remain constant at 10%.What is the present value of the painting's expected price at the end of the third year?

Question

Quizplus · Accepted Answer

The present value is calculated using the formula PV = FV / (1 + r)^n, where FV is the future value ($100,000), r is the real interest rate (0.10), and n is the number of years (3). So, PV = $100,000 / (1.10)^3 = $88,899.

A Painting Is Currently Worth $100,000,and Is Expected to Maintain