Question

What is the present value of $9,500 payable at the end of 7 years? Use a nominal rate (monthly compounding) of 8.25%.

Answer 1

PV= $5,342.89

Step-by-step explanation:

Giving the following information:

Future value (FV)= $9,500

First, we need to calculate the monthly interest rate (i) and the number of periods (n):

i= 0.0825/12= 0.006875

n= 7*12= 84

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

PV= FV/(1+i)^n

PV= 9,500/(1.006875^84)

PV= $5,342.89