Given a 5 percent interest rate, compute the present value of deposits made in years 1, 2, 3, and 4 of $1,000, $1,400, $1,400, and $1,500.
A) $4,360.32
B) $4,665.65
C) $5,047.62
D) $5,305.00

Question

Quizplus · Accepted Answer

The present value (PV) of each deposit can be calculated using the formula PV = FV / (1 + r)^n, where FV is the future value of the deposit, r is the annual interest rate, and n is the number of years until the deposit is made. For each deposit:- Year 1: PV = $1,000 / (1 + 0.05)^1 = $952.38- Year 2: PV = $1,400 / (1 + 0.05)^2 = $1,269.31- Year 3: PV = $1,400 / (1 + 0.05)^3 = $1,208.17- Year 4: PV = $1,500 / (1 + 0.05)^4 = $1,235.79Adding these values together gives the total present value of the deposits: $952.38 + $1,269.31 + $1,208.17 + $1,235.79 = $4,665.65.

Given a 5 Percent Interest Rate, Compute the Present Value