Asked by Jovan Luv'milah on May 09, 2024
Verified
The present value of $60,000 to be received in one year, at 6% compounded annually, is (rounded to nearest dollar)
A) $56,604
B) $63,396
C) $60,000
D) $3,396
Present Value
The present value of a future amount of money or series of cash flows, assuming a certain rate of return.
Compounded Annually
A method of calculating interest where the interest earned each year is added to the principal, thereby earning interest in subsequent years.
Received
The action of obtaining or accepting something, such as goods, payments, or services.
- Comprehend the methodology and computation of present value for future cash flows.
Verified Answer
MD
Meghan DonovanMay 09, 2024
Final Answer :
A
Explanation :
We can use the formula for present value of a single amount: PV = FV/(1+i)^n where PV is the present value, FV is the future value, i is the interest rate, and n is the number of periods. Plugging in the given values, we get: PV = 60,000/(1+0.06)^1 = $56,604. Rounded to the nearest dollar, the answer is A: $56,604.
Learning Objectives
- Comprehend the methodology and computation of present value for future cash flows.