Question

Compute the present value of an $1,350 payment made in nine years when the discount rate is 11 percent. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Answer 1

Answer:

The present value of PV in this case is $527.76 approximately.

Explanation:

The mathematical or accounting formula of Present Value(PV)=$\frac{FV}{(i+r)^{n} }$ where FV denotes the future cash payment to be made,r represents the discount rate and n is the number of years in which the future payment has to made.Here,the future cash payment of FV is given as $1350,the discount rate is 11% or 0.11 and the number of years in which the FV has to be paid is 9 years.

Hence,PV in this case=$\frac{1350}{(1+0.11)^{9} }=\frac{1350}{(1.11)^{9} }=\frac{1350}{2.5580 }=527.76 dollars$ approximately

Therefore,based on the information given the PV in this case is $527.76 approximately.