Question

Calculate the present value. (Round your answer to two decimal places.)

Answer 1

Answer:

Step-by-step explanation:

Present value formula;

(PV) = $\frac{FV}{(1+r)^{n} }$

FV= Future amount (A) = $30,000

r = interest rate; monthly rate in this case = 7% / 12 = 0.5833%  or 0.005833 as a decimal

n= total duration of investment (in months) in this case= 7*12 = 84 months

Next, plug in the numbers into the formula;

PV = $\frac{30,000}{(1.005833)^{84} } \\ \\ =\frac{30,000}{1.62994868}$

=18,405.48747

Therefore present value rounded to 2 decimal places = $18,405.49