Below is a table for the present value of $1 at Compound interest. Below is a table for the present value of an annuity of $1 at compound interest.
Using the tables above, what is the present value of $4,000 (rounded to the nearest dollar) to be received at the end of each of the next four years, assuming an earnings rate of 12%?

Question

Below is a table for the present value of $1 at Compound interest. Below is a table for the present value of an annuity of $1 at compound interest.
 Using the tables above, what is the present value of $4,000 (rounded to the nearest dollar) to be received at the end of each of the next four years, assuming an earnings rate of 12%?

Quizplus · Accepted Answer

From the present value of an annuity of $1 table, we find the factor for n=4 and i=12% to be 3.03735.
So, the present value of each $4,000 payment is $4,000 x 3.03735 = $12,149.40
Adding up the present values of all four payments, we get $12,149.40 x 4 = $48,597.60
Finally, using the present value table for $1 at compound interest and i=12%, we find the factor to be 0.32201 for n=4. Multiplying this by the total present value of the payments, we get $48,597.60 x 0.32201 = $15,656.69, which when rounded to the nearest dollar is $12,148. Therefore, the best choice for the present value of $4,000 received at the end of each of the next four years is C.

Below Is a Table for the Present Value of $1