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3 years ago

Present value concept

Business

1 answer:

Setler [38]3 years ago

8 0

Answer:

The present value concept

1. The single investment made today, earning 5% annual interest that will be worth $4,400 at the end of 5 years is:

$3,447.52

2. The present value of $4,400 to be received at the end of 5 years if the discount rate is 4% is:

$3,447.52

3. The most I would pay today for a promise to repay me $4,400 at the end of 5 years if my opportunity cost is 5% is:

$3,447.52

4. A. A single investment made today, earning 5% annual interest, worth $4,400 at the end of 5 years is $__3,447.52____.

B. The present value of $4,400 to be received at the end of 5 years, the discount rate is 5% is__$3,447.52____.

C. The most you would pay today for a promise to repay you $4,400 at the end of 5 years if your opportunity cost is 5% is $__3,447.52___.

A. The annual interest rate is also called the discount rate or the opportunity cost.

B. In all three cases, you are solving for the present value, PV, which is $3,447.52.

Explanation:

You will need to invest $3,447.52 at the beginning to reach the future value of $4,400.00.

FV (Future Value) $4,400.00

PV (Present Value) $3,447.512

N (Number of Periods) 5.000

I/Y (Interest Rate) 5.000%

PMT (Periodic Payment) $0.00

Starting Investment $3,447.52

Total Principal $3,447.52

Total Interest $952.48

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Read 2 more answers

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Using TVM Calculation,

Present Value of savings = [FV = 0, PMT = 3,375, N = 10 , I = 7,500]

PV = 3375

PI = 33750/7,500

PI = 4.50

Time Cashflows

0 -$7,500.00

1 $3,275.00

2 $3,275.00

3 $3,275.00

4 $3,275.00

5 $3,275.00

6 $3,275.00

7 $3,275.00

8 $3,275.00

9 $3,275.00

10 $3,275.00

IRR 42.39%

Learn more about security here brainly.com/question/7449721

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