Assuming that money is worth 10%, compute the present value of: 1. $14,000 received 15 years from today. $Answer 2. The right to inherit $4,000,000 14 years from now. $Answer 3. The right to receive $10,000 at the end of each of the next six years. $Answer

Assuming that money is worth 10%, compute the present value of: 1. $14,000 received 15 years from today. $Answer 2. The right to inherit $4,000,000 14 years from now. $Answer 3. The right to receive $10,000 at the end of each of the next six years. $Answer

Personal Finance

13th Edition

ISBN:9781337669214

Author:GARMAN

Publisher:GARMAN

Chapter1: Understanding Personal Finance

Section1.4: Perform Time Value Of Money Calculations

Problem 3CC

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Concept explainers

Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.

Question

Present Value Computations

Assuming that money is worth 10%, compute the present value of:

1. $14,000 received 15 years from today.

$Answer

2. The right to inherit $4,000,000 14 years from now.

$Answer

3. The right to receive $10,000 at the end of each of the next six years.

$Answer

4. The obligation to pay $9,000 at the end of each of the next 10 years.

$Answer

5. The right to receive $18,000 at the end of the 7th, 8th, 9th, and 10th years from today.

$Answer

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