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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Business

Grayson

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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Answers (1)

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Olivia Duke · Answer 1

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.