Question

Fine the present value sum of money that will amount to 4500 in 4 years if the interest is 8% p.a. Compounded quarterly.

Answer 1

The effective interest rate of an account with 8% interest is approximately, 8.243% through the equation,
ieff = (1+i/4)^4 - 1

Through the effective interest rate, the time span given, and the future value, the present worth can be obtained by,
P = 4500/ (1+0.08243)^4 = 3278

Thus, the present value of the money is 3278 rounded of to the nearest tenths.