Question

What is the present value of a security that will pay $34,000 in 20 years if securities of equal risk pay 8% annually? Round your answer to the nearest cent.

Answer 1

Answer:

present value = $7296.14

Explanation:

given data

future value =  $34,000

time t = 20 year

rate r = 8% = 0.08

solution

we apply here future value formula for get present value that is

future value = present value × $(1+r)^{t}$    .....................1

put her value and we get

$34,000 = present value ×  $(1+0.08)^{20}$

present value = $\frac{34000}{1.08^{20}}$

present value = $\frac{34000}{4.660}$

present value = $7296.14