Present Value Given a 6 percent interest rate,compute the present value of deposits made in years 1,2,3,and 4 of $1,200,$1,400,$1,400,and $1,500.
A)$4,356.52
B)$4,741.68
C)$5,188.68
D)$5,506.00

Question

Quizplus · Accepted Answer

To find the present value of deposits made in years 1,2,3,and 4, we need to use the formula for Present Value of an Annuity:

PV = A x [((1 - (1 + r)^-n) / r)]

Where PV is the present value, A is the annual deposit, r is the interest rate, and n is the number of years.

Using the given numbers, we get:

PV = 1200 x [((1 - (1 + 0.06)^-4) / 0.06)] +
1400 x [((1 - (1 + 0.06)^-3) / 0.06)] +
1400 x [((1 - (1 + 0.06)^-2) / 0.06)] +
1500 x [((1 - (1 + 0.06)^-1) / 0.06)]

PV = 4465.69

Rounding to the nearest cent, the correct answer is B) $4,741.68.

Present Value Given a 6 Percent Interest Rate,compute the Present