Question

(Present value) What is the present value of the following future amounts? 

a. $800 to be received 10 years from now discounted back to the present at 11 percent. 

b. $300 to be received 8 years from now discounted back to the present at 9 percent. 

c. $1,050 to be received 13 years from now discounted back to the present at 5 percent. 

d. $1,050 to be received 4 years from now discounted back to the present at 20 percent. 

a. What is the present value of $800 to be received 10 years from now discounted back to the present at 11 percent? $ (Round to the nearest cent.)

Answer 1

Answer a.

Present Value = Future Value / (1 + Discount Rate)^Period
Present Value = $800 / 1.11^10
Present Value = $281.75

Answer b.

Present Value = Future Value / (1 + Discount Rate)^Period
Present Value = $300 / 1.09^8
Present Value = $150.56

Answer c.

Present Value = Future Value / (1 + Discount Rate)^Period
Present Value = $1,050 / 1.05^13
Present Value = $556.84

Answer d.

Present Value = Future Value / (1 + Discount Rate)^Period
Present Value = $1,050 / 1.20^4
Present Value = $506.37