If the interest rate this year is 8.8% and the interest rate next year will be 1
ID: 2613363 • Letter: I
Question
If the interest rate this year is 8.8% and the interest rate next year will be 10.8%, what is the future value of $1 after 2 years? What is the present value of a payment of $1 to be received in 2 years? (Do not round intermediate calculations. Round your answers to 4 decimal places.)
If the interest rate this year is 8.8% and the interest rate next year will be 10.8%, what is the future value of $1 after 2 years? What is the present value of a payment of $1 to be received in 2 years? (Do not round intermediate calculations. Round your answers to 4 decimal places.)
Explanation / Answer
Future Value of 1$ will be $ 1*1.088*1.108 = $1.20
PV of $1 receivable in 2 years will be 1/(1.108*1.088)= $0.829