Question

You have a savings account, and you expect that in 4 years you'll have $8,900 saved in it. If the discount rate is 6%, what is the present value of that account? Enter your answer in terms of dollars, without the dollar sign or commas, and rounded to the nearest cent. That is, for example, if your answer is $1,628.8934, then enter 1628.89

Answer 1

The present value of an account expected to have $8,900 in 4 years with a 6% discount rate is $7,050.89.

Step-by-step explanation:

To find the present value of an account with an expected future value, we use the present value formula. Given that the future value is $8,900 in 4 years with a discount rate of 6%, we can calculate the present value (PV) using the formula PV = FV / (1 + r)^n, where FV is the future value, r is the discount rate, and n is the number of years.

Plugging in the given values, we get:

PV = 8900 / (1 + 0.06)^4

PV = 8900 / (1.2625)

PV = 8900 / 1.2625

PV = 7050.89

Therefore, the present value of the account is $7,050.89.