The present value of $12,000 for six years compounded at 6% semiannually is:
A) $12,814.08
B) $8,461.08
C) $8,416.56
D) $8,614.80
E) None of these

Question

Quizplus · Accepted Answer

The formula for present value of a lump sum is:

PV = FV / (1 + r/n)^(n*t)

where PV is the present value, FV is the future value, r is the interest rate, n is the number of compounding periods per year, and t is the number of years.

Plugging in the given values, we get:

PV = 12000 / (1 + 0.06/2)^(2*6)
PV = 12000 / (1.03)^12
PV = $8,416.56

Therefore, the best answer is C.

The Present Value of $12,000 for Six Years Compounded at 6