Answer to Question #255291 in Economics for Sera

Question

What is the simple discount for a car costing 880,000 pesos, is a present value of 950,000 pesos due at the end of 5 years.

Answer 1

$PV = 950,000/(1 + r)^5 = 880,000.$

$(1 + r)^5 = 1.0795,$

1 + r = 1.0154,

r = 0.0154 or 1.54%.