Answer: 70.22
Step-by-step explanation:
To find the equivalent present value of the settlement, we need to discount the promised amount of $79 back to the present using the interest rate.
The formula to calculate the present value is:
Present Value = Future Value / (1 + r)^t
Where:
Future Value = $79 (the promised amount)
r = 3.00% or 0.03 (interest rate as a decimal)
t = 4 years (time in years)
Plugging in these values, we get:
Present Value = $79 / (1 + 0.03)^4
Calculating inside the parentheses first:
Present Value = $79 / (1.03)^4
Using a calculator or a computer program, we find:
Present Value ≈ $79 / 1.12550801 ≈ $70.22
Therefore, the equivalent present value of the settlement, rounded to the nearest cent, is approximately $70.22.