Question

If you invest P dollars (the present value of your investment) in a fund that pays an interest rate of r, as a decimal, compounded yearly, then after t years, your investment will have a value F dollars, which is known as the future value. The discount rate D for such an investment is given by D = 1 (1 + r)t where t is the life, in years, of the investment. The present value of an

Answer 1

The discount rate D can be calculated using the formula D = 1 / (1 + r)^t, where r is the interest rate as a decimal and t is the number of years. For example, if you invest $1,000 at a 5% interest rate for 3 years, the discount rate would be 0.8638.

Step-by-step explanation:

The subject of this question is mathematics, specifically finance and investment.

To calculate the discount rate D for an investment, we can use the formula D = 1 / (1 + r)^t, where r is the interest rate as a decimal and t is the number of years the investment will last.

For example, let's say you invest $1,000 in a fund that pays an interest rate of 5% compounded yearly for 3 years. To calculate the discount rate D, we can substitute r = 0.05 and t = 3 into the formula: D = 1 / (1 + 0.05)^3 = 0.8638.

So the discount rate for this investment is 0.8638, meaning that the present value of the future investment will be $863.80.