Answer:
Instructions are listed below.
Explanation:
Giving the following information:
a) What is the present value of $34,900 due 9 periods from now, discounted at 9%
We need to use the following formula:
PV= FV/(1+i)^n
PV= 34,900/1.09^9= $16,068.83
(b) What is the present value of $34,900 to be received at the end of each of 12 periods, discounted at 8%
First, we need to find the final value:
FV= {A*[(1+i)^n-1]}/i
A= annual deposit
FV= {34,900*[(1.08^12)-1]}/0.08= 662,301.71
PV= 662,301.71/(1.08^12)= 263,009.12
