Question

Present Value Computations

Using the present value tables, solve the following.
(Click here to access the time value of money tables to use with this problem.)
Round your answers to two decimal places.
Required:
1. What is the present value on January 1, 2016, of $30,000 due on January 1, 2020, and discounted at 10% compounded annually?
$
2. What is the present value on January 1, 2016, of $40,000 due on January 1, 2020, and discounted at 11% compounded semiannually?
$
3. What is the present value on January 1, 2016, of $50,000 due on January 1, 2020, and discounted at 16% compounded quarterly?
$

Answer 1

The present value on January 1, 2016, of $30,000 due on January 1, 2020, and discounted at 10% compounded annually is $ 20,490.40

The present value on January 1, 2016, of $40,000 due on January 1, 2020, and discounted at 11% compounded semiannually is $ 26,063.95

The present value on January 1, 2016, of $50,000 due on January 1, 2020, and discounted at 16% compounded quarterly is $ 26,695.41

Step-by-step explanation:

The present value formula is given as PV=FV*(1+rs/t)^-nt

where FV is the future worth of the amount

rs is the stated interest

t is the number of compounding per year

n is the number of years of investment which 4 years in this case

PV of $30,000 compounded annually:

PV=$30,000*(1+10%/1)^-(1*4)=$20,490.40

PV of $40,000 compounded semiannually:

PV=$40,000*(1+11%/2)^-(2*4)=$ 26,063.95

PV of $50,000 compounded quarterly:

PV=$50,000*(1+16%/4)^-(4*4)=$26,695.41