Question

The rate of earnings is 6% and the cash to be received in 4 years is $20,000. The present value amount, using the following partial table of present

value of $1 at compound interest is
Year
6%
10%
12%
1
0.943
0.909
0.893
2
0.890
0.826
0.797
3
0.840
0.751
0.712
4
0.792
0.683
0.636
a. $12.720
Ob. $16,800
Oc. 513,660
Od. $15.840

Answer 1

$15,840

Step-by-step explanation:

Present value = Future value / (1 + r)^n

Rate, r = 6% = 0.06

Future value = $20,000

Number of years, n = 4

Present value = $20000 / (1 + 0.06)^4

Present value = $20000 / 1.06^4

Present value = $20,000 / 1.26247696

Present value = $15841.873

Using the partial table of present values :

Present value = Future value * PV(6%, 4)

PV at 6%, 4 years = 0.792

Present value = $20,000 * 0.792 = $15,840