Compute the present value of $500 paid in three years using the following discou

Question

Compute the present value of $500 paid in three years using the following discount rates: 7 percent in the first year, 8 percent in the second year, and 9 percent in the third year. (Do not round intermediate calculations and round your answer to 2 decimal places.)

Compute the present value of $500 paid in three years using the following discount rates: 7 percent in the first year, 8 percent in the second year, and 9 percent in the third year. (Do not round intermediate calculations and round your answer to 2 decimal places.)

Explanation / Answer

This is calculated using the formula PV = FV/((1 + r1)* (1 + r2)* (1 + r3)) Substituting the given values, where, FV= 500 r1= 7%=0.07 r2=8% = 0.08   & r3= 9% = 0.09 PV=The present value to be found out PV=500/((1+0.07)*(1+0.08)*(1+0.09)) 396.95 Answer: $ 396.95

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