Question

What is the present value of $6,000 to be paid at the end of each of the next eight periods assuming an interest rate of 10%

Answer 1

PV= $32,009.58

Step-by-step explanation:

Giving the following information:

Annual deposit= $6,000

Interest rate= 10%

Number of periods= 8 years

First, we need to calculate the future value using the following formula:

FV= {A*[(1+i)^n-1]}/i

A= annual deposit

FV= {6,000*[(1.1^8) - 1]} / 0.1

FV= $68,615.33

Now, the present value:

PV= FV/(1+i)^n

PV= 68,615.33 / (1.1^8)

PV= $32,009.58