Question

For each of the following, compute the present value:
Present Value Years Interest Rate Future Value
$12 4 % $18,928 4 9 43,117 16 12 806,382 21 11 663,816

Answer 1

Answer:

1. $11,822.61

2. $30,577.76

3. $131,546.81

4. $74,117.67

Step-by-step explanation:

The calculation of present value is shown below:-

$Present\ value = \frac{Future\ value}{(1 + r)^n}$

For 1 scenario

$Present\ value = \frac{\ 18,928}{(1 + 0.04)^{12}}$

$= \frac{\ 18,928}{1.601}$

= $11,822.61

So, the present value of 1st scenario is $11,822.61

For 2nd scenario

$Present\ value = \frac{\ 43,117}{(1 + 0.09)^{4}}$

$= \frac{43,117}{1.411}$

= $30,577.76

So, the present value of 2nd scenario is $30,577.76

For 3rd scenario

$Present\ value = \frac{\ 806,382}{(1 + 0.12)^{16}}$

$Present\ value = \frac{\ 806,382}{6.130}$

= $131,546.81

So, the present value of 3rd scenario is $131,546.81

For 4th scenario

$Present\ value = \frac{\ 663,816}{(1 + 0.11)^{21}}$

$= \frac{\ 663,816}{8.949}$

= $74,117.67

So, the present value of 4th scenario is $74,117.67

Therefore we simply applied the above formula