Question

Compute the present value of $1,500 paid in three years using the following discount rates: 5 percent in the first year, 6 percent in the second year, and 7 percent in the third year. (Do not round intermediate calculations. Round your answer to 2 decimal places.).

Answer 1

Answer:

The present value of $1,500 paid in three years  is $1259.54

Explanation:

A = P(1 + r/100)^n

where :

A is the future value

P is the present value

r is the rate of interest

n is the time period.

1500 = P*(1.05)*(1.06)*(1.07)

P = 1500/1.19091

  = $1259.54

Therefore, The present value of $1,500 paid in three years  is $1259.54