Question: You will receive $4,000 three years from now. The discount rate is 10 percent.
a. What is the value of your investment two years from now? Multiply $4,000 × .909 (one year's discount rate at 10 percent).
b. 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).
c. What is the value of your investment today? Multiply your answer to part b by .909 (one year's discount rate at 10 percent).
d. Confirm that your answer to part c is correct by going to Appendix B (present value of $1) for n = 3 and i = 10%. Multiply this tabular value by $4,000 and compare your answer to the answer in part c. There may be a slight difference due to rounding.