economics - bobpursley, Sunday, October 24, 2010 at 12:06pm

present value= 10,000/(1+i)+10000/(1+i)^2

I do not understand the answer!!!!!

So that he reads th is post, you might better address it to him, by name.

Sra

To understand the answer to the equation, let's break it down step by step.

The equation you provided is a representation of the concept of present value. Present value is a financial calculation used to determine the current value of future cash flows.

In this equation, we have two terms: 10,000/(1+i) and 10,000/(1+i)^2. The "i" in the equation represents the interest rate.

The term 10,000/(1+i) represents the cash flow from the future divided by the discount factor. The discount factor is determined by dividing 1 by (1+i), which discounts the cash flow to its present value.

The term 10,000/(1+i)^2 represents the cash flow from the future divided by the discount factor squared. In this case, we are discounting the cash flow for two periods.

When you add both terms together, you are summing the present values of the two cash flows. This gives you the total present value of the cash flows.

To compute the answer, you need to substitute a specific value for the interest rate "i". Once you know the interest rate, you can easily calculate the present value using a calculator or a spreadsheet program like Microsoft Excel.

I hope this explanation helps clarify the answer for you.