Use the following tables to calculate the present value of a $774,000 @ 6%, 5-year bond that pays $46,440 interest annually, if the market rate of interest is 7%. Round to the nearest dollar. Present Value of $1 Present Value of Annuity of $1 Periods 5 % 6 % 7 % 10 % Periods 5 % 6 % 7 % 10 % 1 .95238 .94340 .93458 .90909 1 .95238 .94340 .93458 .90909 .90703 .89000 .87344 .82645 2 1.85941 1.83339 1.80802 1.73554 .86384 .83962 .81630 .75131 2.72325 2.67301 2.62432 2.48685 .82270 .79209 .76290 .68301 | 4 3.54595 3.46511 3.38721 3.16987 .78353 .74726 .71299 .62092 4.32948 4.21236 4.10020 3.79079 .74622 .70496 .66634 .56447 5.07569 4.91732 4.76654 4.35526 7 .71068 .66506 .62275 .51316 7 5.78637 5.58238 5.38929 4.86842 8 .67684 .62741 .58201 .46651 8. 6.46321 5.97130 5.33493 .64461 .59190 .54393 .42410 9 7.10782 6.80169 6.51523 5.75902 10 .61391 .55839 .50835 .38554 10 7.72173 7.36009 7.02358 6.14457

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Q: compare Future Value and Present Value?

A: The comparison between present value and future value is as follows:

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.