Question

(a) What is the present value of $30,700 due 12 periods from now, discounted at 12%? (Round answer to 2 decimal places, e.g. 25.25.)

enter the present value of the investment discounted at 12% rounded to 2 decimal places

(b) What is the present value of $30,700 to be received at the end of each of 5 periods, discounted at 10%? (Round answer to 2 decimal places, e.g. 25.25.)

enter the present value of the investment discounted at 10% rounded to 2 decimal places

Answer 1

SOLUTION

(A) Future value = $30,700, Number of compounding period = 12, Discount rate is 12%

Present value = Future value * PVIF (12%,12)

= 30,700 * 0.2567

= $7,880.69

(B) Future value = $30,700, Number of compounding period = 5, Discount rate is 10%

Present value = Future value * PVAF (10%,5)

= $30,700 * 3.7908

= $116,377.56