Question

Use the following formula where P is the present value of A dollars t years from now earning annual interest r compounded n times per year.P=A(1+r/n)^-ntFind the present value of $300,000, 20 years from now if interest is compounded semiannually at 8.5%

Answer 1

Given:

A = $ 300,000

t = 20 years

r = 8.5 % = 0.085

n = 2 (semi annual)

Required:

Present Value, P

Solution:

`P=A(1+(r)/(n))^(-nt)`
`P=300000(1+(0.085)/(2))^(-2(20))=56,674.75`

Answer:

P = $ 56,674.75