Chapter 4, Problem 7PROB

Summary Introduction

The future value is $2,500 due in 5 years at a 9% opportunity cost rate compounding annually, quarterly, and monthly.

Present value is the current value of future investment or series of future payments at a predetermined interest rate for a specified period.

$PV=\frac{FV}{{\left(1+\frac{r}{m}\right)}^{n\times m}}$

Here,

The present value is “PV”.

The future value is “FV”.

The interest rate is “r”.

The maturity period of time period is “n”.

The no of compounding is “m”.