Chapter 2: Financial Markets: Part 2

First, the present value of future profits rises the lower the expected path of interest rates. Let’s return to our example above. It was shown that the PV of $1,000 ten years from now, assuming 10% interest rates year in and year out, was: PV1000 = $1,000/(1 + 0.10)10 = $ 385.54 ................
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