Question

Calculate the present value of $4,000 received five 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.

4000=P(1.07)^5

P=$4000/1.07^5

=$2851.94(Approx)

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.

4000=P(1.09)^5

P=$4000/1.09^5

=$2599.73(Approx)

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.

4000=P(1.11)^5

P=$4000/1.11^5

=$2373.81(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.

4000=P(1+11/200)^(2*5)

P=4000/(1+11/200)^(2*5)

=$2341.72(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.

4000=P(1+11/400)^(4*5)

P=$4000/(1+11/400)^(4*5)

which is equal to

=$2325.00(Approx).