QUESTION 24 6 points Save Answer Your friend Barney owes you $1,200. You have be

Question

QUESTION 24 6 points Save Answer Your friend Barney owes you $1,200. You have been waiting for Barney to pay you back for three years. Yesterday he told you that he could pay you $1,040 or he said he could pay you the whole $1,200 in three more years. Your discount rate is 4.5%. What if the present value of the $1,200 in three years. (answer to the nearest dollar no cents please) QUESTION 25 6 points Save Answer You received $500 from Uncle Louie for a graduation present. You plan on investing it for 7 years to use after graduate school. what will be the future value of the $500 in 7 years? Round your answer to the nearest Dollar. If you can earn 4% QUESTION 26 6 pointsSave Answer When calculating the present value, the present value will be less if the discount rate is and the term/years are . Ohiger, longer O lower, longer higher, shorter Olower, shorter

Explanation / Answer

Ans:

24)

Present Value = Future Value / (1+r)^n

= $1200 / (1+0.045)^3

= $1200 / 1.143

= $1050

25)

Future Value = present value * (1+r)^n

= $500 * (1+0.04)^7

= $500 * 1.32

= $660

26) higher , longer

Present Value is computed under discounting concept .The higher the discounting rate and longer the term,present value is lower.

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