Problem: You will receive $4,000, three years from now. The discount rate is 10 percent.
1) What is the value of your investment two years from now? Multiply $4,000 X .909 (one year's discount rate at 10 percent).
2) What is the value of your investment one year from now? Multiply your answer to part a by .909 (one year's discount rate at 10 percent).
3) What is the value of your investment today? Multiply your answer to part b by .909 (one year's discount rate at 10 percent).