Question

Below is a table for the present value of $1 at Compound interest. Year 6% 10%...

Below is a table for the present value of $1 at Compound interest.

Year 6% 10% 12%
1 0.943 0.909 0.893
2 0.890 0.826 0.797
3 0.840 0.751 0.712
4 0.792 0.683 0.636
5 0.747 0.621 0.567

Below is a table for the present value of an annuity of $1 at compound interest.

Year 6% 10% 12%
1 0.943 0.909 0.893
2 1.833 1.736 1.690
3 2.673 2.487 2.402
4 3.465 3.170 3.037
5 4.212 3.791 3.605

Using the tables above, what would be the present value of $14,316 (rounded to the nearest dollar) to be received four years from today, assuming an earnings rate of 10%?

a.$45,382

b.$14,316

c.$11,338

d.$9,778

Homework Answers

Answer #1

Answer:

1.The calculation of present value:

Present Value(PV) = FV x (1/1+r)n

At 6%, At 10% At 12%

PV = $1 x 0.943 PV = $1 x 0.909 PV = $1 x 0.893

= $0943 = $0.909 = $0.893

Accordingly, Option (1) is the correct answer.

2. The calculation of present value of an annuity:

Present Value of annuity(PVA) = FV x [{1-(1+r)-n} / r]

At 6%, At 10% At 12%

PVA = $1 x 0.943 PVA = $1 x 0.909 PVA = $1 x 0.893

= $0.943 = $0.909 = $0.893

Accordingly, Option (1) is the correct answer.

3. Calculation of present value:

Furure Value (FV)= $14,316

Present Value (PV) =??

Rate of Interest (r) = 10%

Period (n) = 4

Now,

Present Value(PV) = FV x (1/1+r)n

  = $14,316 x 0.6830

   = $9,778

Accordingly, Option (d) is the correct answer.

  

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