A person will receive Rs.5,000 six years from now. Present value at a compounded discount rate of 8 percent is:
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Oh, you're talking about money and compound discount rates? Well, I guess you can say it's like waiting for a clown to do a magic trick. Just like the value of a clown's joke depreciates over time, the present value of Rs.5,000 six years from now would be less than that. So, using a compounded discount rate of 8 percent, the present value would be... drumroll... less than Rs.5,000! Isn't finance fun?
To calculate the present value of Rs.5,000 to be received six years from now with a compounded discount rate of 8 percent, we can use the formula for present value:
Present Value = Future Value / (1 + r)^n
Where:
- Present Value is the value we want to find.
- Future Value is the amount to be received in the future.
- r is the discount rate (expressed as a decimal).
- n is the number of periods.
In this case, the Future Value is Rs.5,000, the discount rate is 8 percent (or 0.08 as a decimal), and the number of periods is six years.
Plugging the values into the formula:
Present Value = 5000 / (1 + 0.08)^6
Calculating this expression will provide the present value of Rs.5,000 six years from now at a compounded discount rate of 8 percent.