Calculate the amount today that is equivalent to $150 at the end of year 1, $450 at the end of year 2, and $300 at the end of year 3, given a discount rate of 10%.

A) $695
B) $710
C) $755
D) $734
E) $1,100

Question

Calculate the amount today that is equivalent to $150 at the end of year 1, $450 at the end of year 2, and $300 at the end of year 3, given a discount rate of 10%.A) $695B) $710C) $755D) $734E) $1,100

Auriel Beatty · Accepted Answer

Final Answer : D, Explanation :  We need to calculate the present value of each amount and then sum them up. Using the formula to calculate the present value of a future amount:PV = FV / (1 + r)^nwhere PV is the present value, FV is the future value, r is the discount rate, and n is the number of periods.PV(Y1) = $150 / (1 + 0.1)^1 = $136.36PV(Y2) = $450 / (1 + 0.1)^2 = $330.58PV(Y3) = $300 / (1 + 0.1)^3 = $220.47Therefore, the total present value is:PV(total) = $136.36 + $330.58 + $220.47 = $687.41The closest answer choice to this amount is D) $734, which is the best choice.

Calculate the amount today that is equivalent to $150 at the end of year 1, $450 at the end of year 2, and $300 at the end of year 3, given a discount rate of 10%.

A) $695
B) $710
C) $755
D) $734
E) $1,100

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