Question

Calculate the present value of $6,000 received five years from today if your investments pay (Do not round intermediate calculations. Round your answers to 2 decimal places. (e.g., 32.16))

a. 5 percent compounded annually
b. 7 percent compounded annually
c. 9 percent compounded annually
d. 9 percent compounded semiannually
e. 9 percent compounded quarterly

Answer 1

To calculate the present value of $6,000 received five years from today, you can use the formula for calculating the present value of a future value.

Step-by-step explanation:

To calculate the present value of $6,000 received five years from today, we can use the formula for calculating the present value of a future value:

Present Value = Future Value / (1 + Interest Rate)^Number of Periods

a. At 5 percent compounded annually:

Present Value = $6,000 / (1 + 0.05)^5 = $4,626.74

b. At 7 percent compounded annually:

Present Value = $6,000 / (1 + 0.07)^5 = $4,337.09

c. At 9 percent compounded annually:

Present Value = $6,000 / (1 + 0.09)^5 = $4,080.32

d. At 9 percent compounded semiannually:

Present Value = $6,000 / (1 + (0.09/2))^(5*2) = $4,523.55

e. At 9 percent compounded quarterly:

Present Value = $6,000 / (1 + (0.09/4))^(5*4) = $4,566.41