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svetoff [14.1K]
3 years ago
6

Bill wants to give Maria a $590,000 gift in two years. If money is worth 12% compounded semiannually, what is Maria's gift worth

today
Business
1 answer:
PtichkaEL [24]3 years ago
8 0

Answer:

the present value is $467,335.2613

Explanation:

The computation of the value worth today is shown below:

= Amount in two years ÷ (1 + rate of interest)^number of years

= $590,000 ÷ (1 + 12% ÷ 2)^2×2

= $590,000 ÷ 1.06^4

= $590,000 ÷ 1.26247696

= $467,335.2613

Hence, the present value is $467,335.2613

We simply applied the above formula so that the correct value could come

And, the same is to be considered  

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Answer:

(i) $133.12

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(iii) $300.8

(iv) $301.6

Explanation:

From the compounding formula;

Future value = Present value (1+\frac{r}{m}) ^{mn}

where r is the rate, m is the number of payment per year, and n is the number of years.

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Given that present value = $800, r = 8%, n = 4 years.

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Future value = 800(1.08)^{4}

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(ii) quarterly,

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Future value = 800(1+\frac{0.08}{3}) ^{(4x3)}

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(iii) monthly,

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Future value = 800(1+\frac{0.08}{12}) ^{(4x12)}

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(iv) weekly,

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Future value = 800(1+\frac{0.08}{54}) ^{(4x54)}

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Interest = $1101.6 - $800

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