Paul Havlik promised his grandson Jamie that he would give him
$6,300 7 years from today for graduating from high school. Assume
money is worth 8% interest compounded semiannually.
What is the present value of this $6,300? (Do not round
intermediate calculations. Round your answer to the nearest
cent.)
We use the formula:
A=P(1+r/2)^2n
where
A=future value
P=present value
r=rate of interest
n=time period.
6,300=P*(1+0.08/2)^(2*7)
P=6,300/(1+0.08/2)^(2*7)
=6,300*0.577475082
=$3638.09(Approx).
Paul Havlik promised his grandson Jamie that he would give him $6,300 7 years from today...
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