Question

Select the correct equation from those below, if the interest rate is 10%. Let F1=$700 and F2=$7,000. Group of answer choices P = 700(P/F, 1%, 10) +7,000(P/F, 4%, 10) P = 700(P/F, 10%, 1) +7,000(P/F, 10%, 4)

Answer 1

Answer:

P = 700 (P/F, 10%, 1) + 7,000 (P/F, 10%, 4)   ........ (2nd option)

Explanation:

This question is related to Uniform Series Present Worth.

General equation for USPW is

                    P = F (P/F, i, n)

Where,

                    P = Present worth

                    F = Uniform arithmetic series value

                    P/F = Uniform series present worth factor

                    i = Interest rate

                    n = Number of years     (Note: n is not given in question, it can be derived form given equation for F1 n = 1 and for F2 n = 4)

Lets solve for F1. Where F1 = 700, i = 10% and n = 1  

                  P = 700 (P/F, 10%, 1)   ........................ eq (1)

Now solve for F2. Where F2 = 7,000, i = 10% and n = 4

                  P = 7,000 (P/F, 10%, 4) .......................... eq (1)

By combining these 2 equations we get

                 P = 700 (P/F, 10%, 1) + 7,000 (P/F, 10%, 4)  ................... Answer.