Question

Compute the present value of a $2,500 deposit in year 4 and another $10,000 deposit at the end of year 8 if interest rates are 15 percent.

a. $4,211.26
b. $4,572.19
c. $4,698.40
d. $4,901.57

Answer 1

Total PV= $4,698.4

Step-by-step explanation:

Giving the following information:

Deposit 1:

FV= $2,500

n= 4 years

Deposit 2:

FV= 10,000

n= 8

To calculate the present value, we need to use the following formula:

PV= FV / (1 + i)^n

Deposit 1:

PV= 2,500 / (1.15^4)

PV= 1,429.38

Deposit 2:

PV= 10,000 / (1.15^8)

PV= 3,269.02

Total PV= $4,698.4