Calculate the following Present Value and note the relationships between the Present Value and discount rates and the length of time the payment is received. Present Value: todays value of a future cash flow

Years invested remains at 5 years; the discount rate changes

1. PV of $100 received in 5 years with a discount rate of 3%:

2. PV of $100 received in 5 years with a discount rate of 5%:

3. PV of $100 received in 5 years with a discount rate of 7%:

4. As discount rate increases, the PV _______________.

The discount rate remains at 3%; the years invested changes

1. PV of $100 received in 5 years with a discount rate of 3%:

2. PV of $100 received in 10 years with a discount rate of 3%:

3. PV of $100 received in 15 years with a discount rate of 3%:

4. As the length of time the money is received increases, the PV __________________.

What's the major difference of the two parts?