Microeconomics (Book Only)
Microeconomics (Book Only)
12th Edition
ISBN: 9781285738307
Author: Roger A. Arnold
Publisher: Cengage Learning
Question
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Chapter 16, Problem 1VQP
To determine

Explain the present value of dollar amount.

Expert Solution & Answer
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Explanation of Solution

Future value (FV) is $1,000. Interest rate (i) is 5%. Time period (n) is 2. Present value (PV) can be calculated as follows:

PV=FV(1+i)n=1,000(1+0.05)2=1,0001.1025=907.029

Then, the present value of dollar amount is $ 907.03.

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