Present Value Computations Using the present value tables, solve the following.
ID: 2416173 • Letter: P
Question
Present Value Computations
Using the present value tables, solve the following.
(Click here to access the time value of money tables to use with this problem.)
Round your answers to two decimal places.
Required:
What is the present value on January 1, 2016, of $30,000 due on January 1, 2020, and discounted at 10% compounded annually?
$
What is the present value on January 1, 2016, of $40,000 due on January 1, 2020, and discounted at 11% compounded semiannually?
$
What is the present value on January 1, 2016, of $50,000 due on January 1, 2020, and discounted at 16% compounded quarterly?
$
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Explanation / Answer
We need to use basic time value of money function PV = FV/(1 + r)n
No of years between Jan 1, 2016 till Jan 1, 2020 is 4.
a) When FV = $30000, n = 4 years, r = 10% compounded annually
PV = 30000/(1 + 10%)4 = $20,490.40
b) When FV = $30000, n = 4 years, r = 11% compounded semi-annually
n = 8 periods, r = 5.5%
PV = 30000/(1 + 5.5%)8 = $19,547.97
a) When FV = $30000, n = 4 years, r = 16% compounded quarterly
PV = 30000/(1 + 4%)16 = $16,017.25