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21 June, 10:03

Select the correct equation from those below, if the interest rate is 10%. Let F1=$700 and F2=$7,000. Group of answer choices P = 700 (P/F, 1%, 10) + 7,000 (P/F, 4%, 10) P = 700 (P/F, 10%, 1) + 7,000 (P/F, 10%, 4)

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  1. 21 June, 11:43
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    P = 700 (P/F, 10%, 1) + 7,000 (P/F, 10%, 4) ... (2nd option)

    Explanation:

    This question is related to Uniform Series Present Worth.

    General equation for USPW is

    P = F (P/F, i, n)

    Where,

    P = Present worth

    F = Uniform arithmetic series value

    P/F = Uniform series present worth factor

    i = Interest rate

    n = Number of years (Note: n is not given in question, it can be derived form given equation for F1 n = 1 and for F2 n = 4)

    Lets solve for F1. Where F1 = 700, i = 10% and n = 1

    P = 700 (P/F, 10%, 1) ... eq (1)

    Now solve for F2. Where F2 = 7,000, i = 10% and n = 4

    P = 7,000 (P/F, 10%, 4) ... eq (1)

    By combining these 2 equations we get

    P = 700 (P/F, 10%, 1) + 7,000 (P/F, 10%, 4) ... Answer.
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