Question

What is the present value of $25,500 due 12 periods from now, discounted at 11%? (round answer to 2 decimal places,

e.g. 25.25.)?

Answer 1

The present value of an amount, FV, due in n periods from now and discounted at d% is given by


`PV=FV(1+r)^(-n)`

Thus, the present value of $25,500 due 12 periods from now, discounted at 11% is given by


`PV=25,500(1+0.11)^(-12) \\ \\ =25,500(1.11)^(-12)=25,500(0.2858) \\ \\ =\bold{\$7,288.94}`