Asked by Arantza sofia Morales gutierrez on Sep 23, 2024
Verified
If the interest rate is 11%,$1500 received at the end of 12 years is worth how much today?
A) 1500*(1+0.11) ^12
B) 1500/(1 +0 .11) ^12
C) 1500/(1 + 11) ^12
D) 1500
Interest Rate
The percentage of a sum of money charged for its use, often expressed annually, affecting loans and savings.
Present Value
The current worth of a future sum of money or stream of cash flows given a specified rate of return.
- Ascertain the current value of income streams from an investment.
Verified Answer
KB
Korissa Bennettabout 12 hours ago
Final Answer :
B
Explanation :
We need to use the present value formula which is:
Present Value = Future Value / (1 + r)n
where r is the interest rate and n is the number of years.
Plugging in the values, we get:
Present Value = 1500 / (1 + 0.11)12
Present Value = 1500 / 3.169865...
Present Value = $473.63 (rounded to the nearest cent)
So, the best choice is B.
Present Value = Future Value / (1 + r)n
where r is the interest rate and n is the number of years.
Plugging in the values, we get:
Present Value = 1500 / (1 + 0.11)12
Present Value = 1500 / 3.169865...
Present Value = $473.63 (rounded to the nearest cent)
So, the best choice is B.
Learning Objectives
- Ascertain the current value of income streams from an investment.