To determine To calculate: The present value (P) of the future amount. Explanation Given: The future amount (A) is $ 459.57 , the rate ( r ) of interest is 5.5 % , and the time ( t ) is 7 months. Formula Used: P = A 1 + r t , where ‘A’ be the maturity amount, ‘P’ be the principal amount, ‘r’ be the rate of interest and ‘t’ be the number of years. Calculation: Step 1: Rate is expressed as a decimal while calculating the interest. Thus, to convert the rate percent into a decimal, rate percent is divided by 100. r = 5.5 % = 5.5 100 = 0.055 Step 2: The time is to be expressed in the year. Thus, to convert the time into the year, the months are divided by 12. t = 7 months 12 months = 7 12 Step 3: In order to calculate the present value, the future amount is divided by the result obtained from adding 1 to the product of rate and time

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ISBN: 8220106844557

Author: MULLINS

Publisher: PEARSON

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Chapter 5, Problem 10RE

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To calculate: The present value (P) of the future amount.

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