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Your aunt offers you a choice of $21,200 in 25 years or $430 today. Use Appendix B as an approximate answer, but calculate your final answer using the formula and financial calculator methods. a-1. If money is discounted at 17 percent, what is the present value of the $21,200

Respuesta :

letmeanswer

The present value is = $917.526

Explanation:

The following formula will be used in order to calculate the present value  

[tex]\mathrm{PV}=\mathrm{FV} * \frac{1}{(1+\mathrm{i})^{\wedge} \mathrm{n}}[/tex]

Here, PV = Present value, FV = Future value, I = Interest, n = number of periods

The present value of $21200 with 17 percent discount rate of return for 20 years will be calculated as follows:

[tex]\mathrm{PV}=\mathrm{FV} * \frac{1}{(1+\mathrm{i})^{\wedge} \mathrm{n}}[/tex]

[tex]=\$ 21200 /(1+\underline{0.17})^{\wedge} 20[/tex]

Therefore, the present value after calculating is = 917.526

$430 today should not be chosen.

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