Question

Calculate the present value of Rs. 6000.

a. Received one year from now.

b. Received at the end of five years.

c. Received at the end of fifteen years.

Assume a 5 percent time preference rate.The present value factor at 5 % for 1 year, 5 years

and 15 years are 0.952, 0.784 and 0.481.​

Answer 1

Answer:

$\bf \: years are 0.952, 0.784 and 0.481.$

Answer 2

Answer:

To calculate the present value of Rs. 6000 received at different times in the future, we will need to use the present value factor at a 5% time preference rate. The present value factor tells us how much the future amount is worth in today's money.

Explanation:

a. Rs. 6000 received one year from now has a present value of Rs. 5,712 (Rs. 6000 x 0.952).

b. Rs. 6000 received at the end of five years has a present value of Rs. 4,704 (Rs. 6000 x 0.784).

c. Rs. 6000 received at the end of fifteen years has a present value of Rs. 2,886 (Rs. 6000 x 0.481).

Therefore, if we assume a 5% time preference rate, the present values of Rs. 6000 received at different times in the future are:

a. Rs. 5,712 when received one year from now.

b. Rs. 4,704 when received at the end of five years.

c. Rs. 2,886 when received at the end of fifteen years.

By calculating the present value, we can compare the value of money received at different times in the future and make better financial decisions.

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