Business, 20.10.2020 20:01 SuBzErO24

Present value concept 1. What single investment made today, earning 5% annual interest, will be worth $4,400 at the end of 5 years?
2. What is the present value of $4,400 to be received at the end of 5 years if the discount rate is 5%?
3. What is the most you would pay today for a promise to repay you $4,400 at the end of 5 years ifyour opportunity cost is 5%?
4. Compare, contrast, and discuss your findings in part a through c.
A. A single investment made today, earning 5% annual interest, worth $4,400 at the end of 5 years is $.
B. The present value of $4,400 to be received at the end of 5 years, the discount rate is 5% is.
C. The most you would pay today for a promise to repay you $4,400 at the end of 5 years if your opportunity cost is 5% is $.
D. Compare, contrast, and discuss your findings in part a through c.
A. The annual interest rate is also called the discount rate or the opportunity cost.
B. In all three cases, you are solving for the present value, PV, which is $3,447.52.
C. In all three cases, the answer is $$3,447.52. In part a, it is the payment, PMT. In part b, it is the present value, PV. In part c, it is the future value, FV.
D. In parts a and c, $4,400 is the future value, FV. In part b, $4,400 is the present value, PV. Therefore, parts a and c have the same answer, while part b has a different answer.

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