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What is the present value of $5,000 received: a. Twenty years from today when the interest...

What is the present value of $5,000 received:

a. Twenty years from today when the interest rate is 8% per​ year?

b.Ten years from today when the interest rate is 8% per​ year?

c.Five years from today when the interest rate is 8% per​ year?

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a. Twenty years from today when the interest rate is 8% per​ year?The present value of $5,000 received 20 years from today when the interest rate is 8% per year is ​$____. ​(Round to the nearest​ dollar.)

b.Ten years from today when the interest rate is 8% per​ year? The present value of $5,000 received 10 years from today when the interest rate is 8% per year is $______. ​(Round to the nearest​ dollar.)

c. Five years from today when the interest rate is 8% per​ year? The present value of $5,000 received 5 years from today when the interest rate is 8% per year is ​$____.​(Round to the nearest​ dollar.)

Solutions

Expert Solution

Present value = PV

Future value = FV

Rate of interest = r

Number of years = t

a.

PV = FV/(1 + r)^ t

      = 5,000 / (1 + 0.08) ^ 20

      = 5,000 / 1.08 ^ 20

      = 5,000 / 4.66095

      = 1,072.74 …

      = 1,073 (Answer) rounded

b.

PV = FV/(1 + r)^ t

      = 5,000 / (1 + 0.08) ^ 10

      = 5,000 / 1.08 ^ 10

      = 5,000 / 2.15892

      = 2,315.97 …

      = 2,316 (Answer) rounded

c.

PV = FV/(1 + r)^ t

      = 5,000 / (1 + 0.08) ^ 5

      = 5,000 / 1.08 ^ 5

      = 5,000 / 1.46932

      = 3,402.93 …

      = 3,403 (Answer) rounded

jeff jeffy answered 7 months ago
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