Question

How do you find the present value of the given future payment at the specified interest rate. $5000 due in two years at 9 1/2% compounded daily?

Answer 1

Present value is `$ 4135.00`

Explanation:

Future value is `F= $5000` , Period is `t=2` years ,

Rate of interest `9.5%` compounded daily

`:. r= 9.5/(100*365) = 0.00026`

We know `F = P (1+r)^(2*365)` ; P is presen value

`:. P = F / ((1+r)^(2*365)) = 5000/(1.00026)^730 ~~ $ 4135.00`

Present value is `$ 4135.00` [Ans]