Asked by ramon rodriguez on May 23, 2024
Verified
What is the present value of $1 that will be paid to you in 5 years if the interest rate is 7%? Work it out to the nearest tenth of a cent.
Present Value
The estimated value in today's terms of a sum of money or series of cash flows expected in the future, according to a specific rate of return.
Interest Rate
The percentage charged on the total amount of borrowed money or paid as earnings on investment, typically annualized.
- Comprehend the principle of present value and its computation.
Verified Answer
MA
Mauricio AguilarMay 23, 2024
Final Answer :
Present value =1(1+r)n=1(1.07)5=11.40255=71.3 cents \text { Present value } = \frac { 1 } { ( 1 + r ) ^ { n } } = \frac { 1 } { ( 1.07 ) ^ { 5 } } = \frac { 1 } { 1.40255 } = 71.3 \text { cents } Present value =(1+r)n1=(1.07)51=1.402551=71.3 cents
Learning Objectives
- Comprehend the principle of present value and its computation.