Calculate the present value PV (in dollars) of an investment that will be worth $1,000 at the stated interest rate after the stated amount of time nearest cent.) 14 years, at 4.7% per year, compounded quarterly

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Chapter1: Making Economics Decisions
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WERS
WANEFMAC7 3.2.014.
Calculate the present value PV (in dollars) of an investment that will be worth $1,000 at the stated interest rate after the stated amount of time. (Round
nearest cent.)
14 years, at 4.7% per year, compounded quarterly
PV = $ 519.88
Transcribed Image Text:WERS WANEFMAC7 3.2.014. Calculate the present value PV (in dollars) of an investment that will be worth $1,000 at the stated interest rate after the stated amount of time. (Round nearest cent.) 14 years, at 4.7% per year, compounded quarterly PV = $ 519.88
Expert Solution
Future Value and Present Value Formula

Future Value = Present Value (1 + r / 100) ^ n

FV = $1000

r = 4.7% / 4 = 1.175% (As it is compounded quarterly, r% = r / 4%)

n = 14 * 4 = 56 (As it is compounded quarterly, n = n * 4)

PV has to be calculated

FV = PV (1 + r / 100) ^n

1000 = PV (1 + 1.175 / 100) ^56

1000 = PV (1 + 0.01175) ^56

 

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