What is the formula for the present value of $1 one year from now? If the rate of interest is 5 percent, what is the present value of $10 to be paid one year from now?
What will be an ideal response?
The formula for the present value of $1 one year from now is $1/(1 + r) where r is the market rate of interest. If the interest rate is 5 percent, the present value of $10 to be paid one year from now is $9.52 .
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