What is the present value of a lump sum, $240,000 in 6 years if the interest...

What is the present value of a lump sum, $240,000 in 6 years if the interest rate (discount rate) is 11.4 percent annually? (Round your answer to 2 decimal places. (e.g., 123,345.16))

Your answer:

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Expert Solution

Here we will use the following formula:

PV = FV / (1 + r%)ⁿ

where, FV = Future value = $240000, PV = Present value, r = rate of interest = 11.4%, n= time period =6

now, putting these values in the above equation, we get,

PV = $240000 / (1 + 11.4%)⁶

PV = $240000 / (1 + 0.114)⁶

PV = $240000 / (1.114)⁶

PV = $240000 / 1.91122204009

PV = $125574.11

So, present value is $125574.11.

jeff jeffy answered 2 years ago

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