Answer:
The question is incomplete, see the complete question below:
Determine the combined present value as of December 31, 2021, of the following four payments to be received at the end of each of the designated years, assuming an annual interest rate of 8%. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1). Find N as well.
Payment Year Received
$
9,000 2022
9,600 2023
11,200 2025
13,400 2027
Combined present value 33,313.9
Explanation:
Present Value:The worth today of a sum receivable or payable in the future is called Present Value. It is premised on the concept of time value of money- that $1 today is worth more than $1 tomorrow. Why?
Because of the opportunity to invest; if invested, the $1 of today would earn interest so making it worth more than $1 dollar on the maturity day.
To calculate the present value of a future cash flow, we simply adiscount it using an appropriate discount rate which is the required rate of return. The discount rate is 8% in this question.
We can quickly calculate the Present Value (PV) using this formula:
PV = FV × (1+r)^(-n)
where FV - Future value, r- interest rate- 8%, n- number of years.
We can now apply these concepts to this question:
Year Present Value
2022 9000 × (1.08)^(-1) 8,333.3
2023 9,600 × (1.08)^(-2) 8230.5
2025 11,300 × (1.08)^(-4) 8305.8
2027 13,400 × (1.08)^(-6) <u> 8,444.3</u>
Combined present value <u>33,313.9</u>
