Question

Calculate the present value. (Round your answer to two decimal places.)

A = $30,000, r = 7% compounded monthly, t = 7 years

Answer 1

Explanation:

Present value formula;

(PV) =
`(FV)/((1+r)^(n) )`

FV= Future amount (A) = $30,000

r = interest rate; monthly rate in this case = 7% / 12 = 0.5833% or 0.005833 as a decimal

n= total duration of investment (in months) in this case= 7*12 = 84 months

Next, plug in the numbers into the formula;

PV =
`(30,000)/((1.005833)^(84) ) \\ \\ =(30,000)/(1.62994868)`

=18,405.48747

Therefore present value rounded to 2 decimal places = $18,405.49