Answer:
$25,396.01
Explanation:
We first calculate the present value of the investment on December 31, 2022 using the present value (PV) of an ordinary annuity as follows:
PV = P × [{1 - [1 ÷ (1+r)]^n} ÷ r] …………………………………. (1)
Where;
PV = Present value of the investment on December 31, 2022 = ?
P = yearly payments = $10,000
r = interest rate = 4% = 0.04
n = number of years = 43
Substitute the values into equation (1) to have:
PV = 10,000 × [{1 - [1 ÷ (1+0.4)]^3} ÷ 0.4] = 10,000 × 2.77509103322713 = $27,750.91
Since, the PV of the investment on December 31, 2022 is $27,750.91, we can now calculate its own PV in January 1, 2020 which is 3 years as follows:
PV in January 2020 = $27,750.91 ÷ (1 + 0.4)^3 = $27,750.91 ÷ 1.092727 = $25,396.01
