Question

# 1. Find the present value of \$800 due in the future under each of these conditions:...

1. Find the present value of \$800 due in the future under each of these conditions:

1. 5% nominal rate, semiannual compounding, discounted back 5 years. Do not round intermediate calculations. Round your answer to the nearest cent.
\$

2. 5% nominal rate, quarterly compounding, discounted back 5 years. Do not round intermediate calculations. Round your answer to the nearest cent.
\$

3. 5% nominal rate, monthly compounding, discounted back 1 year. Do not round intermediate calculations. Round your answer to the nearest cent.

a)

Rate = 5% / 2 = 2.5%

Number of periods = 5 * 2 = 10

Present value = Future value / (1 + r)n

Present value = 800 / (1 + 0.025)10

Present value = 800 / 1.280085

Present value = \$624.96

b)

Rate = 5% / 4 = 1.25%

Number of periods = 5 * 4 = 20

Present value = Future value / (1 + r)n

Present value = 800 / (1 + 0.0125)20

Present value = 800 / 1.282037

Present value = \$624.01

c)

Rate = 5% / 12 = 0.4167%

Number of periods = 1 * 12 = 12

Present value = Future value / (1 + r)n

Present value = 800 / (1 + 0.004167)12

Present value = 800 / 1.0511661

Present value = \$761.06

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