Question

Use the following formula where P is the present value of A dollars t years from now earning annual interest r compounded n times per year.P=A(1+r/n)^-ntFind the present value of $300,000, 20 years from now if interest is compounded semiannually at 8.5%

Answer 1

Given:

A = $ 300,000

t = 20 years

r = 8.5 % = 0.085

n = 2 (semi annual)

Required:

Present Value, P

Solution:

$P=A(1+\frac{r}{n})^{-nt}$$P=300000(1+\frac{0.085}{2})^{-2(20)}=56,674.75$

Answer:

P = $ 56,674.75