the rate of discount.

[verma.kunal13]

Hello friends.

Could someone please help me out with one doubt. In chapter 5, question 5.13, page 18, while solving the discount payment... Why solution has taken the power as -24, why not only 24? Please help.

Warm regards,
Kunal Verma

 

[John Lee]

Hello friends.

Could someone please help me out with one doubt. In chapter 5, question 5.13, page 18, while solving the discount payment... Why solution has taken the power as -24, why not only 24? Please help.

Warm regards,
Kunal Verma

Because we are given a rate of discount which we want to accumulate with.

In the same way if you have 10% interest you multiply by 1.1^-5 if you want to discount for 5 years.

 

[verma.kunal13]

Still vague to me.

Thank you Mr. Lee!

My doubt is still unanswered. I was thinking for accumulating the formula should be used as C(1-d)^n. Why -n when we are already using the discount rate (d). Otherwise we accumulate the value using rate of interest C(1+i)^n. Pleaase explain where I am thinking wrong?

Good day!

 

[John Lee]

Thank you Mr. Lee!

My doubt is still unanswered. I was thinking for accumulating the formula should be used as C(1-d)^n. Why -n when we are already using the discount rate (d). Otherwise we accumulate the value using rate of interest C(1+i)^n. Pleaase explain where I am thinking wrong?

Good day!

(1-d)^n = V^n which is discounting. We are asked to accumulate not discount. Hence the negative power.

 

[verma.kunal13]

Thanks

thank you Mr. Lee!

I got it now! Please help me with this convertibility thing. I guess I will go mad soon!

Warm regards,
Kunal Verma,
verma.kunal13@gmail.com