Asked by Vaishnavi Surnis on Apr 30, 2024
Verified
What is the present value of $1 that will be paid to you in 6 years if the interest rate is 10%? Work it out to the nearest tenth of a cent.
Present Value
The value today of a sum of money or series of payments expected in the future, adjusted for a certain rate of return.
Interest Rate
The cost of borrowing money or the return on investment, expressed as a percentage of the amount borrowed or invested.
- Become familiar with the idea of present value and the process of determining it.
Verified Answer
LP
Leywes PierreApr 30, 2024
Final Answer :
Present value =1(1+r)n=1(1.10)6=11.771561=56.4 cents \text { Present value } = \frac { 1 } { ( 1 + \mathrm { r } ) ^ { \mathrm { n } } } = \frac { 1 } { ( 1.10 ) ^ { 6 } } = \frac { 1 } { 1.771561 } = 56.4 \text { cents } Present value =(1+r)n1=(1.10)61=1.7715611=56.4 cents
Learning Objectives
- Become familiar with the idea of present value and the process of determining it.