Find the present value of $3,900 under each of the following rates and periods.

Question

Find the present value of $3,900 under each of the following rates and periods.

(If you solve this problem with algebra round intermediate calculations to 6 decimal places, in all cases round your final answer to the nearest penny.)

a. 8.9 percent compounded monthly for five years.

Present value $ Find the present value of $3,900 under each of the following rates and periods. (If you solve this problem with algebra round intermediate calculations to 6 decimal places, in all cases round your final answer to the nearest penny.) 8.9 percent compounded monthly for five years. 6.6 percent compounded quarterly for eight years. 4.3 percent compounded daily for four years. 5.7 percent compounded continuously for three years.

Explanation / Answer

B= 2310.09

C=3283.75

D=3287.06

Using the formula for the PV of $1, where $1 / (1 + r)^n, r is the rate per period and n is the number of periods.

8.9% / 12 = .0074166 and n = 12 x 5, or 60. PV = 3,900 / 1.0074166^60; PV = 2,503.
4.3% / 365 and n of 365 x 4
6.6% / 4 and n of 32

Continuous compounding: PV = FV x 1 / e^rt, where e = 2.718. PV = 3,900 / 2.718^(.057x3); 3,900 / 2.718^.171 = 3,900 / 1.18647. PV = 3,28.06

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