Chris Smith will receive $76,800 on 5 years from now, from a trust fund established by his father. Assuming the appropriate interest rate for discounting is 12% (compounded semiannually), what is the present value of this amount today
Answer |
Explanation : |
Future value = $76,800 |
Time period = 5 years |
Interest rate = 12% |
Compounding = Semi annually |
Semi annually interest rate (r) = 12/2 |
= 6% |
Timer period (n) = 10 half years |
Present value =? |
Present value = Future value x Present value factor (r%,n) |
= $76,800 * Present value factor (6%,10) |
= $76,800 * 0.55839 |
= $42,884 ( nearest dollars) |
Note: Exact answer may slightly differ due to rounding off and factor value considered |
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