What lump sum deposited today at 8% compounded quarterly for 10 years will yield the same final amount as deposits of $4000 at the end of each 6-month period for 10 years at 4% compounded semiannually? The value of the lump sum is $ (Round to the nearest cent as needed.)

What lump sum deposited today at 8% compounded quarterly for 10 years will yield the same final amount as deposits of $4000 at the end of each 6-month period for 10 years at 4% compounded semiannually? The value of the lump sum is $ (Round to the nearest cent as needed.)

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 5P

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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

What lump sum deposited today at 8% compounded quarterly for 10 years will yield the same final amount as deposits of $4000 at the end of each 6-month period for 10 years at 4% compounded semiannually?
The value of the lump sum is $ (Round to the nearest cent as needed.)

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