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QuestionFinance
"(Calculating present value) What is the present value of $600 to be received 15 years from now discounted back to the present at 12 percent?
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Part 1
The present value of $600 to be received 15 years from now discounted back to the present at 12 percent is $
enter your response here. (Round to the nearest cent.)"
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Answer
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Step 1:: Identify the formula for calculating present value.
PV = \frac{FV}{(1 + r)^n}
The formula for calculating present value is: where: - 1$ is the number of periods.
Step 2:: Plug in the given values into the formula.
PV = \frac{600}{(1 + 0.12)^{15}}
In this problem, 1$ years.
Step 3:: Calculate the present value.
PV \approx \frac{600}{4.9661} \approx 120.82
First, calculate the denominator: Now, divide the future value by the denominator:
Step 4:: Round the answer to the nearest cent.
PV \approx $120.82
Final Answer
The present value of $600 to be received 15 years from now, discounted back to the present at 12 percent, is approximately $120.82.
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