Homework Answers
Present value can be calculated as Amount paid / (1+r)n as present value calculates the worth of amount at the time of paying due to the rate of interest imposed on it.
The present value of 500 paid at the end of 1st year is 500 / (1+0.08) = 462.96
The present value of 900 paid at the end of 2nd year is 900 / (1+0.08)2 = 771.6
The present value of 1300 paid at the end of 3rd year is 1300 / (1+0.08)3 = 1031.98
The present value of 1700 paid at the end of 4th year is 1700 / (1+0.08)4 = 1249.63
Thus the present value of all the amount being paid till now is 3516.17
Thus the last amount must be 5000 - 3516.17 = 1483.82
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