Question

What is the present value of $7,220 to be received at the end of each of 18 periods, discounted at 5% compound interest? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)

Answer 1

Answer:

The Present Value is $6,710.

Explanation:

The formula to calculate Present Value is:

Formula: Present Value = Future Value

                                       (1 + Discount rate)^Number of periods

Since the Percentage to be used annually. We can replace number of periods which is 18 by 1.5 and substitute the remaining values accordingly:

PV = 7220

      (1+0.05)^1.5

PV = 6710