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hansi is promised to receive $79 in 4 years. hansi, being profligate, prefers to spend this promised amount of money today. what is the equivalent present value of the settlement if the interest rate is 3.00%?

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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.

User Deepak M
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