Final answer:
To calculate the present value of $10,350 due in 7 years with a 5.7% annual discount rate, use the present value formula and consider the future value, discount rate, and the number of years until the money is received.
Step-by-step explanation:
Present Value Calculation
The present value of $10,350 to be received 7 years from today, assuming a discount rate of 0.057 compounded annually, can be calculated using the present value formula. This formula is:
Present Value = Future Value / (1 + discount rate)number of years
To apply this formula to the given scenario:
- Identify the future value (FV), which is $10,350.
- Identify the discount rate (r), which is 0.057.
- Identify the number of years (t), which is 7.
- Apply the present value formula to determine the present value (PV).
So, the calculation is:
PV = 10,350 / (1 + 0.057)7
After performing the computation, we will know what amount of money would need to be invested today at an annual discount rate of 5.7% to amount to $10,350 in 7 years.