Question

The Lexington Property Development Company has a $10,000 note receivable from a customer ddue in three years. How much is the note worth today if the interest rate is 12% compounded monthly?

Answer 1

$6,989.25

Step-by-step explanation:

The Lexington Property Development shall calculate the today's worth of note receivable, which is due in three years, using the following mentioned formula:

F=P(1+i)^n

F=Value of note receivable after three years=$10,000

P=Value of note receivable today=?

i=interest rate compounded monthly=12%/12=1%

n=Due period of note receivable=3*12=36 months

F=P(1+i)^n

$10,000=P(1+1%)^36

P=10,000/(1+1%)^36=$6,989.25