Question

On January 1, a 6-year, $5,000, non-interest-bearing note payable was issued when the market rate of interest was 8%. The present value of the note is

Answer 1

PV= $3,150.85

Step-by-step explanation:

Giving the following information:

Number of periods (n)= 6 yeras

Future value (FV)= $5,000

Interest rate (i)= 8%

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

FV= PV*(1+i)^n

Isolating PV:

PV= FV/(1+i)^n

PV= 5,000/(1.08^6)

PV= $3,150.85