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Question 1144276: find the present value and the compound discount of 6600$ due in 7 years 6 months. if interest is 7.2% quarterly.
Answer by addingup(3677)   (Show Source):
You can put this solution on YOUR website! I think the problem should say interest of 7.2% per annum compounded quarterly. But that's not what you say, you say 7.2% quarterly, so here it goes:
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PV = (Initial cash flow)/(1+rate)^n
7 years 6 months = 30 quarters
PV = 6600/(1+0.072)^30 = 820
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Note: if it was 7.2%/year compounded quarterly, it would be:
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7 years 6 months = 30 quarters
Interest: 0.072/4 = 0.018
PV = 6600/(1+0.018)^30 = 3866.45
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I don't understand what you mean by "the compound discount". You compound when you go from Present Value to Future Value and discount when you go from Future to Present
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