Chapter 6, Problem 6.4E

To determine

Present Value:

The value of today’s amount to be paid or received in the future at a compound interest rate is called as present value. The following formula is used to calculate the present value of an amount:

$\text{Present value of an amount = }\frac{\text{Future value}}{{\left(\text{1 + interest rate}\right)}^{\text{number}\text{of}\text{periods}}}$

To determine: The combined present value of the four payments to be received at the end of the each of the designated years, assuming an annual interest rate of 8% as of December 31, 2016.