#### Details of this Paper

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

Description

solution

Question

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

Price : \$22