Compute the present value of a $160 cash flow for the following combinations of discount rates and times: (Do not round intermediate calculations. Round your answers to 2 decimal places.) a. r= 8%, t= 10 years b. r= 8%, t = 20 years c. r= 4%, t= 10 years d. r= 4%, t= 20 years Present Value $
Compute the present value of a $160 cash flow for the following combinations of discount rates and times: (Do not round intermediate calculations. Round your answers to 2 decimal places.) a. r= 8%, t= 10 years b. r= 8%, t = 20 years c. r= 4%, t= 10 years d. r= 4%, t= 20 years Present Value $
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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![**Present Value Calculation Exercise**
Compute the present value of a $160 cash flow for the following combinations of discount rates and times: **(Do not round intermediate calculations. Round your answers to 2 decimal places.)**
| Present Value |
|---------------|
| a. \( r = 8\%, \, t = 10 \, \text{years} \) |
| b. \( r = 8\%, \, t = 20 \, \text{years} \) |
| c. \( r = 4\%, \, t = 10 \, \text{years} \) |
| d. \( r = 4\%, \, t = 20 \, \text{years} \) |
In this exercise, you will use the concept of present value to determine the current worth of a future cash flow. The present value is calculated using the formula:
\[ PV = \frac{FV}{(1 + r)^t} \]
where \( PV \) is the present value, \( FV \) is the future value ($160 in this case), \( r \) is the discount rate, and \( t \) is the time in years.
**Instructions:**
1. Use the formula to calculate the present value for each scenario.
2. Ensure intermediate calculations are not rounded.
3. Provide your final answers rounded to two decimal places.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff8c879c5-4abd-41e0-a23b-c4f185aff8d4%2F813a593d-ba24-4d9a-8e38-b196a1cd6cdc%2Fq07tpk_processed.jpeg&w=3840&q=75)
Transcribed Image Text:**Present Value Calculation Exercise**
Compute the present value of a $160 cash flow for the following combinations of discount rates and times: **(Do not round intermediate calculations. Round your answers to 2 decimal places.)**
| Present Value |
|---------------|
| a. \( r = 8\%, \, t = 10 \, \text{years} \) |
| b. \( r = 8\%, \, t = 20 \, \text{years} \) |
| c. \( r = 4\%, \, t = 10 \, \text{years} \) |
| d. \( r = 4\%, \, t = 20 \, \text{years} \) |
In this exercise, you will use the concept of present value to determine the current worth of a future cash flow. The present value is calculated using the formula:
\[ PV = \frac{FV}{(1 + r)^t} \]
where \( PV \) is the present value, \( FV \) is the future value ($160 in this case), \( r \) is the discount rate, and \( t \) is the time in years.
**Instructions:**
1. Use the formula to calculate the present value for each scenario.
2. Ensure intermediate calculations are not rounded.
3. Provide your final answers rounded to two decimal places.
Expert Solution
Step 1 Given
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Cash flow - $160
Provided are different combinations of discount rates and times:
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