Question

To the nearest dollar, what is the discounted value of $9,900.00 due in five years, seven months if money is worth 2.2% compounded quarterly.

A. $9,031
B. $6,855
C. $8,757
D. $9,118
E. $6,876

Answer 1

To find the discounted value of $9,900.00 due in five years, seven months, we can use the present value formula. The discounted value is approximately $9,031.

Step-by-step explanation:

To find the discounted value of $9,900.00 due in five years, seven months, we can use the present value formula. The formula is:

Present Value = Future Value / (1 + Discount Rate / Number of Compounding Periods)

First, we need to calculate the number of compounding periods. Since the interest is compounded quarterly, there are 5 years * 4 quarters/year + 7 quarters = 27 quarters. The discount rate is 2.2% or 0.022. Plugging these values into the formula:

Present Value = $9,900.00 / (1 + 0.022 / 27)

Solving this equation gives us a discounted value of approximately $9,031 to the nearest dollar.

Answer 2

The discounted value of $9,900.00 due in five years, seven months at an interest rate of 2.2% compounded quarterly is $9,031.

Step-by-step explanation:

To calculate the discounted value, we can use the formula for present value:

Present Value = Payment / (1 + (Interest Rate/Number of Compounding Periods))^(Number of Compounding Periods * Number of Years)

In this case, the payment is $9,900.00, the interest rate is 2.2%, and the money is compounded quarterly. So, the formula becomes:

Present Value = 9900 / (1 + (0.022/4))^(4 * (5 + 7/12))

Calculating this, we find that the discounted value to the nearest dollar is $9,031. Therefore, the answer is A. $9,031.