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Calculate the present value of the compound interest loan. (Round your answers to the nearest cent.) $27,000 after 6 years at 3% if the interest is compounded in the following ways. (a) annually $ (b) quarterly

Calculate the present value of the compound interest loan. (Round your answers to the nearest cent.) $27,000 after 6 years at 3% if the interest is compounded in the following ways. (a) annually $ (b) quarterly

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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**Calculate the present value of the compound interest loan.** (Round your answers to the nearest cent.) The future value is **$27,000** after **6 years** at an interest rate of **3%** if the interest is compounded in the following ways: (a) Annually $ ________ (b) Quarterly $ ________ This problem requires you to determine the present value (initial amount) needed to reach a future value of $27,000 after 6 years with an interest rate of 3%. The interest can be compounded annually or quarterly.
Transcribed Image Text:**Calculate the present value of the compound interest loan.** (Round your answers to the nearest cent.) The future value is **$27,000** after **6 years** at an interest rate of **3%** if the interest is compounded in the following ways: (a) Annually $ ________ (b) Quarterly $ ________ This problem requires you to determine the present value (initial amount) needed to reach a future value of $27,000 after 6 years with an interest rate of 3%. The interest can be compounded annually or quarterly.
Expert Solution
Step 1

Present Value can be calculated using PV function in excel

PV (rate, nper, pmt, [Fv], [type])

  • Rate The interest rate 
  • Nper  The total number of payments
  • Pmt Payment per period
  • Pv    The present value
  • Fv  The future value
  • Type The number 0 (zero) or 1 and indicates when payments are due.

 

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