Answer:
Step-by-step explanation:
To calculate the present value of $50,000 to be received in 10 years at an annual interest rate of 4%, we can use the present value of $1 table in Exhibit 5. The present value factor for 10 years at 4% is 0.6756 . Therefore, the present value of $50,000 is:
$50,000 x 0.6756 = $33,780
The present value is less than the $50,000 to be received in the future because of the time value of money. Money received in the future is worth less than money received today because of inflation and the opportunity cost of not having that money available to invest today . Therefore, we need to discount the future value of money to its present value using an appropriate interest rate.
I hope this helps you with your calculations!