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Suppose your bank account will be worth $4,200.00 in one year




Question;Suppose your bank account will be worth $4,200.00 in one;year. The interest rate (discount rate) that the bank pays is 5%. What is the;present value of your bank account today?;Suppose you have two bank accounts, one called Account A and;another Account B. Account A will be worth $3,800.00 in one year. Account B;will be worth $6,500.00 in two years. Both accounts earn 5% interest. What is;the present value of each of these accounts? What is the combined present value;of the two accounts?;Suppose you just inherited an oil well. This oil well is;believed to have three years worth of oil left before it dries up. Here is how;much income this oil well is projected to bring you each year for the next;three years;Year 1: $125,000;Year 2: $258,000;Year 3: $310,000;Compute the present value of this stream of income using a;discount rate of 7%. Remember, you are calculating the present value for a;whole stream of income, i.e. the total value of receiving all three payments;(how much you would pay right now to receive these three payments in the;future). Your answer should be one number - the present value for this oil well;at a 7% discount rate.


Paper#42511 | Written in 18-Jul-2015

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