Plan: You need to compute the PV of $1,000 (a Future Value) based on a 6%...

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Plan: You need to compute the PV of $1,000 (a Future Value) based on a 6% discount rate, meaning every $1.06 in one year is worth only $1 today. Execute: PV = $1,000 in one year + $1.06 in one year $ today = $943.40 today Evaluate: If you expect to have $1,000 in one year, you could borrow $943.40 today, and in one year, you would have exactly enough to pay off the loan with 6% interest. Plan: You need to compute the PV of $1,000 (a Future Value) based on a 6% discount rate, meaning every $1.06 in one year is worth only $1 today. Execute: PV = $1,000 in one year + $1.06 in one year $ today = $943.40 today Evaluate: If you expect to have $1,000 in one year, you could borrow $943.40 today, and in one year, you would have exactly enough to pay off the loan with 6% interest.

Answer rating: 100% (QA)

Present value formula PV Future Value ... View the full answer