Question

Score: 0 of 1 pt 3 of 20 (2 complete) HW Sce Problem 5-5 (similar to) (Present value) What is the present value of the following future amounts? a. $900 to be received 9 years from now discounted back to the present at 11 percent b. $200 to be received 6 years from now disc be received 6 years from now discounted back to the present at 9 percent c. $1,100 to be received 13 years from now discounted back to the present at 5 percent d. $1,050 to be received 5 years from now discounted back to the present at 20 percent a. What is the present value of $900 to be received 9 years from now discounted back to the present at 11 percent? $ (Round to the nearest cent.)

Answer 1

5-5

Let present value be PV

Future value be FV

Interest Rate = r

Number of years = n

Hence, FV = PV(1+r)ⁿ

=> PV = FV/(1+r)ⁿ

(a) FV = 900
r = 11%
n = 9
=> PV = 900/(1+0.11)⁹ = $351.83

(b) FV = 200
r = 9%
n = 6
=> PV = 200/(1+0.09)⁶ = $119.25

(c) FV = 1100
r = 5%
n = 13
=> PV = 1100/(1+0.05)¹³ = $583.35

(d) FV = 1050
r = 20%
n = 5
=> PV = 1050/(1+0.20)⁵ = $421.97