Asked by Angelica Golebiewski on Jul 06, 2024
Verified
Using the tables above, what is the present value of $6,000 to be received at the end of each of the next four years, assuming an earnings rate of 10%?
A) $20,790
B) $19,020
C) $14,412
D) $25,272
Present Value
Present value is the current worth of a future sum of money or stream of cash flows given a specified rate of return, crucial in evaluating investment opportunities.
Compound Interest
This is when interest is earned on the principal amount as well as on the interest that has accumulated in earlier periods.
Earnings Rate
The rate at which a company or an investment grows its profit over a specific period, usually expressed as a percentage.
- Interpret present value and future cash flow calculations using present value tables.
Verified Answer
DB
Daniel BilonicJul 09, 2024
Final Answer :
B
Explanation :
To find the present value of an annuity of $6,000 to be received at the end of each of the next four years at an earnings rate of 10%, we use the present value of an annuity table. For 4 years at 10%, the factor is 3.170. Multiplying this factor by $6,000 gives the present value: $6,000 * 3.170 = $19,020.
Learning Objectives
- Interpret present value and future cash flow calculations using present value tables.