Question

Assume you receive $25,500 from an expired 10-year, 4.5% savings certificate. If interest was compounded annually,...

Assume you receive $25,500 from an expired 10-year, 4.5% savings certificate. If interest was compounded annually, how much was initially deposited at the beginning of the time period (i.e., what is the present value of the savings certificate)?

Group of answer choices $16,820 $16,543 $16,420 $16,555

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Homework Answers

Answer #1

The present value of the savings certificate can be calculated with help of below formula-

Where,

PV = Present value

FV = Future value

r = Rate of interest

n= No. of years

Here,

No. of years = 10 years

r = 4.5 %

FV = $25,500

Putting the values in above formula ,

PV = 16420.16 $ (approx)

Hence, option 3rd is correct.

The present value of the savings certificate = $ 16420

Hope it helps!

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