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Arlecino [84]
3 years ago
7

Your aunt offers you a choice of $21,200 in 25 years or $430 today. Use Appendix B as an approximate answer, but calculate your

final answer using the formula and financial calculator methods. a-1. If money is discounted at 17 percent, what is the present value of the $21,200
Business
1 answer:
ryzh [129]3 years ago
7 0

The present value is = $917.526

<u>Explanation:</u>

The following formula will be used in order to calculate the present value  

\mathrm{PV}=\mathrm{FV} * \frac{1}{(1+\mathrm{i})^{\wedge} \mathrm{n}}

Here, PV = Present value, FV = Future value, I = Interest, n = number of periods

The present value of $21200 with 17 percent discount rate of return for 20 years will be calculated as follows:

\mathrm{PV}=\mathrm{FV} * \frac{1}{(1+\mathrm{i})^{\wedge} \mathrm{n}}

=\$ 21200 /(1+\underline{0.17})^{\wedge} 20

Therefore, the present value after calculating is = 917.526

$430 today should not be chosen.

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2 years ago
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Giving the following information:

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