To determine the simple discount and present value (PV) of the investment, we will use the simple discount formula:

Simple Discount Formula:

$\text{Simple Discount} = \text{Future Value} \times \text{Rate} \times \text{Time}$

Where:

• Future Value (FV) = 2300
• Rate (r) = 6% per annum = 0.06
• Time (t) = 7 months = $\frac{7}{12}$ years

Present Value Formula:

$\text{Present Value (PV)} = \text{Future Value} - \text{Simple Discount}$ Or, $\text{PV} = \frac{\text{Future Value}}{1 + r \cdot t}$

Let's compute the simple discount and then the present value.

Step 1: Calculate the Simple Discount

$\text{Simple Discount} = 2300 \times 0.06 \times \frac{7}{12}$ $\text{Simple Discount} = 2300 \times 0.06 \times 0.5833 = 2300 \times 0.035 = 80.5$

Step 2: Calculate the Present Value

$\text{Present Value} = 2300 - 80.5 = 2219.5$

Thus:

• Simple Discount = 80.5
• Present Value = 2219.5

Would you like further details or have any questions?

Here are some related questions to expand on this topic:

1. How does the present value change if the interest rate is higher or lower?
2. What is the difference between simple and compound discounting?
3. How can we calculate the effective interest rate if the investment is compounded annually?
4. How does the time period affect the present value in simple discounting?
5. How would the simple discount be calculated for an investment with quarterly periods?

Tip: In simple discounting, the discount is subtracted from the future value, making it easier to compute the present value directly using the formula.