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Chris Smith will receive $76,800 on 5 years from now, from a trust fund established by...

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

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Answer #1
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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