Question

Problem 5.24 Find the present value of $4,900 under each of the following rates and periods: (Use 365 days for calculation. If you solve this problem with algebra round intermediate calculations to 4 decimal places, in all cases round your final answer to the nearest penny.) a. 8.9 percent compounded monthly for five years. Present value $ b. 6.6 percent compounded quarterly for eight years. Present value $ c. 4.3 percent compounded daily for four years. Present value $ d. 5.7 percent compounded continuously for three years. Present value $

Answer 1

Ans. a) Present Value $3,145.20 b) Present Value $2,902.42 c) Present Value $4,125.74 d) Present Value $4,129.83

Step-by-step explanation:

Hi, questions a) through c) can be answered with the following equation:

`PresentValue=(FutureValue)/((1+(r)/(n) )^(nt) )`

Where:

r = discount rate (or the rate with what the problem starts)

n = Periods per year ( for a) 12, b) 4, c) 365)

t = years

So, let´s start answering.

a) should look like this.

`PresentValue=(4,900)/((1+(0.089)/(12) )^(12*5) )=3,145.20`

b) Should look like this

`PresentValue=(4,900)/((1+(0.066)/(4) )^(4*8) )=2,902.42`

c) Should look like this

`PresentValue=(4,900)/((1+(0.043)/(365) )^(365*4) )=4,125.74`

d) on the other hand follows this equation.

`PresentValue=(FutureValue)/(e^(rt) )`

Again, "t" is years to present value.

d) would look like this.

`PresentValue=(4,900)/(e^(0.057*3) )=4,129.83`

Best of luck