Question

What is the present value of a security that will pay $34,000 in 20 years if securities of equal risk pay 8% annually? Round your answer to the nearest cent.

Answer 1

present value = $7296.14

Step-by-step explanation:

given data

future value = $34,000

time t = 20 year

rate r = 8% = 0.08

solution

we apply here future value formula for get present value that is

future value = present value ×
`(1+r)^(t)` .....................1

put her value and we get

$34,000 = present value ×
`(1+0.08)^(20)`

present value =
`(34000)/(1.08^(20))`

present value =
`(34000)/(4.660)`

present value = $7296.14