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

Question

Quizplus · Accepted Answer

To find the present value, we need to use the formula: PV = FV/(1+r)^n
Here, FV = $10,000, r = 10% = 0.1, and n = 3 years.
Using the table of present value of $1 at compound interest, we find the factor for n=3 and r=10% to be 0.751.
Therefore, PV = $10,000/(1+0.1)^3 = $7,510 (rounded to the nearest dollar). 
Thus, the best choice is C.

The Rate of Earnings Is 10% and the Cash to Be