What is the present value of $7,220 to be received at the end of each of 18 periods, discounted at 5% compound interest? (Round factor values to 5 decimal places, e. g. 1.25124 and final answer to 0 decimal places, e. g. 458,581.)

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Business

Noah Young

25 September, 19:19

What is the present value of $7,220 to be received at the end of each of 18 periods, discounted at 5% compound interest? (Round factor values to 5 decimal places, e. g. 1.25124 and final answer to 0 decimal places, e. g. 458,581.)

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Answers (1)

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Belinda Wilcox · Answer 1

The Present Value is $6,710.

Explanation:

The formula to calculate Present Value is:

Formula: Present Value = Future Value

(1 + Discount rate) ^Number of periods

Since the Percentage to be used annually. We can replace number of periods which is 18 by 1.5 and substitute the remaining values accordingly:

PV = 7220

(1+0.05) ^1.5

PV = 6710