Question

What is the present value of $8,400 in 5 years if the interest rate is 10% compounded quarterly?

Answer 1

The present value is
`\$13,764.38`

Explanation:

we know that

The compound interest formula is equal to

`A=P(1+(r)/(n))^(nt)`

where

A is the Final Investment Value

P is the Principal amount of money to be invested

r is the rate of interest in decimal

t is Number of Time Periods

n is the number of times interest is compounded per year

in this problem we have

`t=5\ years\\ P=\$8,400\\ r=0.10\\n=4`

substitute in the formula above

`A=\$8,400(1+(0.10)/(4))^(4*5)=\$13,764.38`