Given a 4 percent interest rate, compute the present value of deposits made in years 1, 2, 3, and 4 of $1,000, $1,200, $1,200, and $1,400.
A) $4,103.06
B) $4,334.53
C) $4,615.38
D) $4,804.00

Question

Quizplus · Accepted Answer

The present value (PV) of each deposit is calculated using the formula PV = FV / (1 + r)^n, where FV is the future value, r is the interest rate, and n is the number of years. Calculating each deposit: Year 1: $1,000 / (1.04)^1 = $961.54, Year 2: $1,200 / (1.04)^2 = $1,110.68, Year 3: $1,200 / (1.04)^3 = $1,067.00, Year 4: $1,400 / (1.04)^4 = $1,195.31. Adding these gives a total present value of $4,334.53.

Given a 4 Percent Interest Rate, Compute the Present Value