Compute the present value of a $2,500 deposit in year 4 and another $10,000 deposit at the end of year 8 if interest rates are 15%.
A) $4,211.26
B) $4,572.19
C) $4,698.40
D) $4,901.57

Question

Quizplus · Accepted Answer

We can use the present value formula to calculate the present value of the two deposits:

PV = FV / (1 + r)^n

Where PV is the present value, FV is the future value, r is the interest rate, and n is the number of years.

For the $2,500 deposit in year 4:
PV = $2,500 / (1 + 0.15)^4
PV = $1,416.53

For the $10,000 deposit at the end of year 8:
PV = $10,000 / (1 + 0.15)^8
PV = $3,281.87

The total present value of the two deposits is:
PV = $1,416.53 + $3,281.87
PV = $4,698.40

Therefore, the best choice is C.

Compute the Present Value of a $2,500 Deposit in Year