Question

Find the present value PV of the given investment. (Round your answer to the nearest cent.) An investment earns 2% per year and is worth $20,000 after 20 months.

Answer 1

Let P = the PV (principal value).

n = 12, the monthly compounding interval
r = 2 = 0.02, the rate
nt = 20 months

The value if $20,000 after 20 months, therefore
P(1 + r/n)²⁰ = 20000
1.0339P = 20000
P = $19,344.86

Answer: PV = $19,344.86