Answer:
Present value of $1
Explanation:
In this question, we are asked to give the value by which the amount due on a truck is to be multiplied given the interest rate.
From the question, we can identify that $15,000 is the future value of the truck.Now, we are tasked with calculating the present value of the truck.
In order to obtain the present value, the $15,000, which is the present value will have to be multiplied by the present value of $1 for an interest rate i of 8% and a time of year n = 1( considering the time between February 1 2018 and February 1, 2019)
Answer:
0.925926
Explanation:
present value = future value / (1 + r)ⁿ
present value = 1 / (1 + 8%) = 1 / 1.08 = 0.925926
0.925926 = the present value of $1 using an 8% discount rate for the period of 1 year. To determine the actual price of the truck you can just multiply $15,000 by 0.925926 = $13,888.89 ≈ $13,889
The basic premise of finance is that the value of money decreases in time and $1 today is worth more than $1 tomorrow.
