What is the present value on January 1, 2019, of $40,000 due on January 1, 2023,...

Question

Question

What is the present value on January 1, 2019, of $40,000 due on January 1, 2023, and discounted at 11% compounded semiannually?

Answer 1

Answer #1

Future value on January 1, 2023 = $40,000

Discount rate = 11% compounded semiannually

Hence, discount rate (r) = 5.5%

Time period = 4 years

Time period (n) = 4 x 2

= 8 half year

Present value = Future value x Present value factor (r%, n)

= 40,000 x PVF (5.5%, 8)

= 40,000 x 0.65160

= $26,064

Hence, Present value on January 1, 2019 of $40,000 due on January 1, 2023 = $26,064

Exact answer may slightly differ due to rounding off and factor value considered.

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Answer 2

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