Question

What is the present value of $800 to be received at the end of year one, $3,000 at the end of year two, and $1,500 at the end of year three assuming a discount rate of 3%?

Answer 1

$800 ------ $776

$3000 ------ $2822.70

$1500 ------ $1369

Step-by-step explanation:

Percentage of original values = 100%

Percentage discount= 3%

There percentage of original value after each discount= 100 -3 = 97%

For :

$800 at end of year one,

`(97)/(100) * 800 \\ = 776`

$3000 at the end of year two,

`(97)/(100) ( (97)/(100) * 3000) \\ = (97)/(100) * 2910 \\ = 2822.70`

$1500 at the end of year three,

`(97)/(100) ( (97)/(100) ( (97)/(100) * 1500)) \\ = (97)/(100) ( (97)/(100) (1455)) \\ = (97)/(100) (1411.35) \\ = 1369.00`