Ron sewert owes $30,000 on a non-interest-bearing note due January 1, 2026. He o

Question

Ron sewert owes $30,000 on a non-interest-bearing note due January 1, 2026. He offers to pay the amount on January 1, 2016, provided that it is discounted 10% on a compound annual discount basis. What would he have to pay on January 1, 2016, under this assumption? Round your answer to two decimal places. Ron sewert owes $30,000 on a non-interest-bearing note due January 1, 2026. He offers to pay the amount on January 1, 2016, provided that it is discounted 10% on a compound annual discount basis. What would he have to pay on January 1, 2016, under this assumption? Round your answer to two decimal places.

Explanation / Answer

PV = 11583

We have to take $30000 as future value because he actually want to repay on 01-01-2026.

but he is liking to repay on 01-01-2016. So, we have to treat $30000 as future value

Formula: FV = PV(1+r)^n     FV = future value = 30000 PV = Present value = ? r= rate of interest = 10% n= number of years = 10years Calculation: 30000 = PV(1+10%)^10 30000 = PV(1.1)^10 30000 = PV(2.59) PV = 30000/2.59

PV = 11583

We have to take $30000 as future value because he actually want to repay on 01-01-2026.

but he is liking to repay on 01-01-2016. So, we have to treat $30000 as future value

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