Question

Your investment is worth $25,000 today. How much was the original investment if it was compounded quarterly at 6% for 10 years? O A. $18,602.35 B. $13,845.67 C. $13,781.56 OD. $21,541.68 Reset Selection Mark for Review What's This?

Quarterly?

Answer 1

The Value of the Original Investment (Present Value)

Here, we’ve Future Value = $25,000

Quarterly interest rate (r) = 1.50% per quarter [6.00% / 4 Quarters]

Number of years (r) = 40 Years [10 Years x 4 Quarters]

Therefore, the Present Value = Future Value / (1 + r)n

= $25,000 / (1 + 0.0150)40

= $25,000 / (1.0150)40

= $25,000 / 1.814018409

= $13,781.56

“Hence, the Value of the Original Investment (Present Value) will be $13,781.56”