Question

your aunt offers you a choice of $21,600 in 30 years or $200 today. use appendix b as an approximate answer, but calculate your final answer using the formula and financial calculator methods.a-1. if money is discounted at 17 percent, what is the present value of the $21,600?note: do not round intermediate calculations. round your final answer to 2 decimal places.

Answer 1

The present value of $21,600 at a discount rate of 17 percent is approximately $487.37.

Step-by-step explanation:

The present value of $21,600 in 30 years at a discount rate of 17 percent can be calculated using the formula:

Present Value = Future Value / (1 + Discount Rate)Time

Using this formula, we can calculate the present value as:

PV = 21600 / (1 + 0.17)30 = $487.37

Therefore, the present value of $21,600 is approximately $487.37 when discounted at a rate of 17 percent.

Answer 2

The present value of $21,600 discounted at 17% over 30 years is approximately $447.13, which is calculated using the present value formula

`PV = FV / (1 + r)^n`

is more than the immediate offer of $200 today.

Step-by-step explanation:

To calculate the present value of $21,600 discounted at 17 percent over 30 years, you would use the present value formula, which is PV = FV / (1 + r)^n. Here, PV is the present value, FV is the future value of the money, r represents the discount or interest rate, and n represents the number of years until payment.

The formula with the values plugged in is: PV = 21600 / (1 + 0.17)^30. Using a calculator to compute this, you would perform the following: PV = 21600 / (1.17)^30, which equals about $447.13, though this figure may vary slightly depending on rounding during the calculation process.

Comparing the two amounts, $200 today versus the present value of $21,600 in 30 years at a 17% discount rate, we can see that the present value ($447.13) is greater than the $200 immediate option.