Chapter AG, Problem G.8BE

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:

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

The present value of $25,000 due 9 periods from now.

To determine

The present value of $25,000 to be received at the end of 6 periods.