Question

What is the present equivalent of $18,000 to be received in 15 years when the interest rate is 7% per year?

Answer 1

The Present equivalent of the given data(provided in question) will be $6,524.03So, we will Use the following formula to find the present equivalent:-

PV = FV / (1 + r)ⁿ

Where,

PV = TO FIND

FV = $18,000

r = Rate of interest = 7% = 0.07

n = Time (year) = 15 years

Substituting the Respective value in the formula:-

PV = FV / (1 + r)ⁿ

PV = $18,000 / (1 + 0.07)¹⁵

PV = $18,000 / (1.07)¹⁵

PV = $18,000 / 2.75903

PV = $6,524.03

The Present equivalent of the given data will be $6,524.03