Assume you are going to receive a payment of $1,000 in 5 years. You'd like to know what that cash flow would be worth in 2 years. To calculate the answer, you use the given interest rate to obtain an equivalent cash flow expressed in year 2 dollars. This is an example of calculating a ...

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Business

Mango

3 August, 02:34

Assume you are going to receive a payment of $1,000 in 5 years. You'd like to know what that cash flow would be worth in 2 years. To calculate the answer, you use the given interest rate to obtain an equivalent cash flow expressed in year 2 dollars. This is an example of calculating a ...

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June Donovan · Answer 1

The multiple choices are as follows:

Group of answer choices:

A. Present Value

B. Future Value

C. Discounted Value

D. Annuity

E. Lump Sum

The correct option is C, discounted value

Explanation:

The worth of the cash flow which is $1,000 is given with reference to the worth in 5 years' terms, hence restating the cash flow to its worth in two years' time is discounting to its two years' worth.

The answer cannot be present value since the cash flow is not being discounted to today's equivalent amount.

Also, future value is not correct since future value of $1,000 is already provided in the question