Question

What is the present value of $6,000 to be received at the end of each of eight periods, assuming the first payment occurs at the end of the fourth year and an interest rate of 10%?

Answer 1

Answer: Present value = $7200

Step-by-step explanation: Given Principal that is the original amount is $6000

Rate is 10% every fourth year

But the total period is eight.

So the interest would be paid 8/4 = 2 times.

Therefore,

Simple interest

= {principal * rate * no of times}/100

= {$6000*10*2}/100

Simple interest = $1200

Present value

= principal + Simple interest

= $6000 + $1200

= $7200.