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Determine the present value of a debt $6000 due in eight months if interest at 0.25% is allowed.

User Tecnocrata
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Final answer:

To determine the present value of a debt $6000 due in eight months with an interest rate of 0.25%, we use the present value formula. The present value of the debt is approximately $5951.80.

Step-by-step explanation:

To determine the present value of a debt, we can use the present value formula:

Present Value = Future Value / (1 + interest rate)^time

In this case, the future value is $6000, the interest rate is 0.25%, and the time is 8 months. We need to convert the interest rate and time to match the same units (years).

So, the interest rate becomes 0.25% / 12 months = 0.00208, and the time becomes 8 months / 12 months = 0.6667 years. Plugging in these values into the formula, we get:

Present Value = $6000 / (1 + 0.00208)^0.6667 = $5951.80 (rounded to two decimal places).

User Nyenyec
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