Question

Calculate the present value of $5,000 received four years from today if your investments pay (Do not round intermediate calculations. Round your answers to 2 decimal places. (e.g., 32.16))

		Present Value
a.	7 percent compounded annually	$
b.	9 percent compounded annually	$
c.	11 percent compounded annually	$
d.	11 percent compounded semiannually	$
e.	11 percent compounded quarterly	$

Answer 1

1.We use the formula:
A=P(1+r/100)^n
where
A=future value
P=present value
r=rate of interest
n=time period.

5000=P(1.07)^4

P=5000/1.07^4

=$3814.48

2.We use the formula:
A=P(1+r/100)^n
where
A=future value
P=present value
r=rate of interest
n=time period.

5000=P(1.09)^4

P=$5000/1.09^4

which is equal to

=$3542.13

3.We use the formula:
A=P(1+r/100)^n
where
A=future value
P=present value
r=rate of interest
n=time period.

5000=P(1.11)^4

P=5000/1.11^4

which is equal to

=$3293.65(Approx).

4.We use the formula:
A=P(1+r/200)^2n
where
A=future value
P=present value
r=rate of interest
n=time period.

5000=P(1+11/200)^(2*4)

P=5000/(1+11/200)^8

=$3257.99(Approx)

5.We use the formula:
A=P(1+r/400)^4n
where
A=future value
P=present value
r=rate of interest
n=time period.

5000=P(1+11/400)^(4*4)

P=5000/(1+11/400)^(4*4)

which is equal to

=$3239.37(Approx)