Present value decrease as the discount rate increases

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Reference no: EM132073920

1. Why does present value decrease as the discount rate increases?

2. You deposit $1,300 in a bank account that pays 5% stated annual interest compounded monthly. What is the value of your investment at the end of 8 years?

Please round your answer to the nearest cent.

3. A zero-coupon bond is a security that pays no interest, and is therefore bought at a substantial discount from its face value. If stated interest rates are 5% annually (with monthly compounding) how much would you pay today for a zero-coupon bond with a face value of $1,900 that matures in 8 years?

Please round your answer to the nearest cent.

Reference no: EM132073920

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