Question

Given a 6% interest rate, compute the present value of payments made in years one, two, three, and four of $1600, $1800, $1800, and $2100 respectively

Answer 1

Answer ;

Present value formula;  The present value = Amount / (1+r)ⁿ

Amounts are $1600, $1800,$1800,$2100
Rate of Interest (r) 6%

Following are the present values of year 1,2,3 and 4

1st Year =$ 1600

The present value = $ 1600 / 1.06 = $1,509.43

2nd Year =$ 1800
The present value = $ 1800 / 1.06² = $1,601.99

3rd Year =$ 1400
The present value = $ 1400 / 1.06³ =$1,511.31

4th Year =$ 1500
The present value = $ 2100/ 1.06⁴ = $1,663.40

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answered by: anonymous