The rate of earnings is 10% and the cash to be received in two year 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

Using the table, the present value factor for 10% and two years is 0.826. Thus, the PV = $10,000/0.826 = $12,110.10. However, the question asks for the present value amount, not the initial investment. Therefore, we need to subtract the earnings to get the answer, which is PV = $12,110.10 - ($12,110.10 x 0.10) = $10,899.09, which is closest to answer D: $8,260.

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