Answered

At Westonci.ca, we provide reliable answers to your questions from a community of experts. Start exploring today! Get immediate and reliable solutions to your questions from a community of experienced professionals on our platform. Get immediate and reliable solutions to your questions from a community of experienced professionals on our platform.

What is the present value of $25,000 to be received in 15 years at an (a) 6.2% interest rate and, (b) 9.6% interest rate? Explain why the present value is lower when the interest rate is higher.

Sagot :

Answer:

With a higher interest rate, you get more money per period, that acuminates.

The Present value is the starting amount... If the final amount is the same in both scenarios, and you get more interest in the second situation, you can start with a lower amount

Step-by-step explanation:

[tex]PV = CF / (1 + r) t[/tex]

pv1 = 25000/(1.062)^15 = $10,140.80

pv2 = 25000/(1.096)^15 = $6,320.94

Thanks for stopping by. We are committed to providing the best answers for all your questions. See you again soon. Thank you for your visit. We're dedicated to helping you find the information you need, whenever you need it. Thank you for trusting Westonci.ca. Don't forget to revisit us for more accurate and insightful answers.