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1. Exploring Finance: Discounting Discounting Conceptual Overview: Explore the amount $1 is discounted for different...

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1. Exploring Finance: Discounting Discounting Conceptual Overview: Explore the amount $1 is discounted for different compound interest rates across time. The graph shows the discounted value of $1 over time Move the slider to change the compound interest rate and observe how the curve for the present value of $1 changes. The red dotted cursor lines show the present value of $1 at a specific time period in the future. Drag on the graph to select different time periods 1 PVN = FV = 1+b= (1 +0.050)30 = 1.16 = $0.86 1 () 1 Present Value of 51 000 08 06 0.86 08- 05 04 02 00 0 4 6 10 12 14 16 18 20 Periods yint=5 10 20 1. What is the present value of 51 due in 3 years when the discount interest rate is 10% 2. 51:33 b. $1.00 C. $0.75 d. $0.10 -Select 2. How much is each 51 due in 14 years at a discount rate of 5% worth today! 3. 10.86 b. 50.51 C. $1.00 d. $1.00 3. Bond long will pay st in 20 years with a discount interest rate of 5% and Bond Short will pay $1 in 5 years with a discount interest rate of 10% which bond has the higher present value Long greater than Short b. Short greater than Long Clong and short have some present value d. Not enough information to determine Sect

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