Final answer:
The present value of a non-interest-bearing promissory note can be calculated using the present value formula. The formula is: Present Value = Future Value / (1 + discount rate)^n. Calculating this expression will give you the present value of the promissory note.
Step-by-step explanation:
The present value of a non-interest-bearing promissory note can be calculated using the present value formula. The formula is:
Present Value = Future Value / (1 + discount rate)n
Where:
- Future Value is the amount of money to be received in the future
- Discount rate is the interest rate or discount rate
- n is the number of payment periods
In this case, the future value is $1800, the discount rate is 8.375%, and the number of payment periods is 7 months.
Substituting these values into the formula:
Present Value = 1800 / (1 + 0.08375)7/12
Calculating this expression will give you the present value of the promissory note.