Question

Find the present value given the following:Amount needed: $14,500Time in years: 2 1/2Interest: 8%Compounded: quarterly

Answer 1

Given:

`\begin{gathered} FV=14500 \\ n=4 \\ t=2(1)/(2)=2.5 \\ r=8\%=(8)/(100)=0.08 \end{gathered}`

The formula for finding the present value is

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

Substitute

`\begin{gathered} PV=(14500)/((1+(0.08)/(4))^(4*2.5)) \\ PV=(14500)/((1+0.02)^(10)) \\ PV=(14500)/(1.02^(10)) \\ PV=(14500)/(1.219) \\ PV=11895.05 \end{gathered}`

hence, the present value is $11,895.05