The rate of earnings is 12% and the cash to be received in 2 years is $10,000.Determine the present value amount,using the following partial table of present value of $1 at compound interest:

Question

The rate of earnings is 12% and the cash to be received in 2 years is $10,000.Determine the present value amount,using the following partial table of present value of $1 at compound interest: ​
 ​

Quizplus · Accepted Answer

To determine the present value amount, we need to use the formula:
Present Value = Future Value / (1+rate)^n
where rate = 12% and n = 2 years

Using the table, we can find the present value factor for 12% interest rate and 2 years, which is 0.79719.

Thus, 
Present Value = $10,000 / (1+0.12)^2
              = $10,000 / 1.2544
              = $7,970.23 (rounded to nearest dollar)

Therefore, the best choice is C, as it is the closest option to the calculated present value amount.

The Rate of Earnings Is 12% and the Cash to Be