For each of the following, compute the present value (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.): Present Value Years Interest Rate Future Value 12 6 % $ 15,951 3 12 56,557 28 13 891,073 30 10 555,164
For each of the following, compute the present value (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.): Present Value Years Interest Rate Future Value 12 6 % $ 15,951 3 12 56,557 28 13 891,073 30 10 555,164
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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![### Computing Present Value
When determining the present value of a future amount, it is essential to consider the number of years, the interest rate, and the future value itself. Below are the instructions and the data table used to compute the present value. Remember not to round intermediate calculations, and round your final answers to two decimal places (e.g., 32.16).
#### Instructions:
"For each of the following, compute the present value **(Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16)**:"
#### Data Table
| Present Value | Years | Interest Rate | Future Value |
|:-------------:|:-----:|:-------------:|:----------------:|
| | 12 | 6% | $15,951 |
| | 3 | 12% | $56,557 |
| | 28 | 13% | $891,073 |
| | 30 | 10% | $555,164 |
### Explanation:
1. **Years**: The number of years until the future value is received.
2. **Interest Rate**: The rate at which the future value grows annually.
3. **Future Value**: The amount of money in the future that you want to find the present value of.
#### Formula to Compute Present Value:
\[ \text{Present Value} = \frac{\text{Future Value}}{(1 + \text{Interest Rate})^{\text{Years}}} \]
Each cell in the table should be filled using this formula by plugging in the respective years, interest rate, and future value.
For instance, to compute the first row:
\[ \text{Present Value} = \frac{15,951}{(1 + 0.06)^{12}} \]
Repeat the same process for the remaining rows to find their respective present values, ensuring all intermediate calculations are not rounded, and the final answers are expressed to two decimal places.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F249e3087-ac84-499e-a043-461bff034fe9%2F9ce6b092-a2e4-4352-a854-e7f1979c2f24%2Fjpqn9o.png&w=3840&q=75)
Transcribed Image Text:### Computing Present Value
When determining the present value of a future amount, it is essential to consider the number of years, the interest rate, and the future value itself. Below are the instructions and the data table used to compute the present value. Remember not to round intermediate calculations, and round your final answers to two decimal places (e.g., 32.16).
#### Instructions:
"For each of the following, compute the present value **(Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16)**:"
#### Data Table
| Present Value | Years | Interest Rate | Future Value |
|:-------------:|:-----:|:-------------:|:----------------:|
| | 12 | 6% | $15,951 |
| | 3 | 12% | $56,557 |
| | 28 | 13% | $891,073 |
| | 30 | 10% | $555,164 |
### Explanation:
1. **Years**: The number of years until the future value is received.
2. **Interest Rate**: The rate at which the future value grows annually.
3. **Future Value**: The amount of money in the future that you want to find the present value of.
#### Formula to Compute Present Value:
\[ \text{Present Value} = \frac{\text{Future Value}}{(1 + \text{Interest Rate})^{\text{Years}}} \]
Each cell in the table should be filled using this formula by plugging in the respective years, interest rate, and future value.
For instance, to compute the first row:
\[ \text{Present Value} = \frac{15,951}{(1 + 0.06)^{12}} \]
Repeat the same process for the remaining rows to find their respective present values, ensuring all intermediate calculations are not rounded, and the final answers are expressed to two decimal places.
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