Question

What is the present calue of 1000 received 10 years in the future if interst rates are 10% compounded quarterly?

Answer 1

The present value is $57.31.

Step-by-step explanation:

Future value, FV = $ 1000, n = 10 years, rate = 10% and m = 3.

FV = PV
`(1 + r)^(mn)`

where FV is the future value, PV is the present value, r is the rate, m is the number of periods, n is the number of ears.

⇒ 1000 = PV
`(1 + 0.1)^(10*3)`

= PV
`(1.1)^(30)`

1000 = PV x 17.4494

PV =
`(1000)/(17.4494)`

= 57.31

The present value is $57.31.