to calculate present value of $1 chart 6-4 discount rate NOT ANNUITY CHART this

Question

to calculate present value of $1 chart 6-4 discount rate NOT ANNUITY CHART

this is chart 6-5 to calculate present value of an ANNUITY of a 1 discount rate

problem:

Present value calculations%u2014effects of compounding frequency, discount rates, and time periods [LO 10]

The present value of $40,000 to be received in 6 years at an interest rate of 16%, compounded annually, is $16,418.

Using a present value table (Table 6-4 and Table 6-5), your calculator, or a computer program present value function, calculate the present value of $40,000 for each of the following items (parts a%u2014f) using these facts, except

Interest is compounded semiannually. (Do not round PV factors. Round your answer to the nearest dollar amount.Omit the "$" sign in your response.)

Interest is compounded quarterly. (Do not round PV factors. Round your answer to the nearest dollar amount. Omit the "$" sign in your response.)

(c)

A discount rate of 14% is used. (Do not round PV factors. Round your answer to the nearest dollar amount. Omit the "$" sign in your response.)

(d)

A discount rate of 20% is used. (Do not round PV factors. Round your answer to the nearest dollar amount. Omit the "$" sign in your response.)

(e)

The cash will be received in 4 years. (Do not round PV factors. Round your answer to the nearest dollar amount.Omit the "$" sign in your response.)

(f)

The cash will be received in 8 years. (Do not round PV factors. Round your answer to the nearest dollar amount.Omit the "$" sign in your response.)

The present value of $40,000 to be received in 6 years at an interest rate of 16%, compounded annually, is $16,418.

Explanation / Answer

a) for semiannual interest ...

interest rate per period = 16/2 = 8%

no. of periods of compounding = 6*2 = 12

so PV factor of 12 years at 8% = 0.3971

so Present value = 40000*0.3971 = $ 15884



b)


interest rate per period = 16/4 = 4%

no. of periods of compounding = 6*4 = 24

so PV factor of 24 years at 4% = 0.3901

so Present value = 40000*0.3901 = $ 15604


c)

interest rate per period = 14%

no. of periods of compounding = 6

so PV factor of 6 years at 14% = 0.4556

so Present value = 40000*0.4556 = $ 18224


d)

interest rate per period = 20%

no. of periods of compounding = 6

so PV factor of 6 years at 20% = 0.3349

so Present value = 40000*0.3349 = $ 13396


e)

interest rate per period = 16%

no. of periods of compounding = 4

so PV factor of 4 years at 16% = 0.5523

so Present value = 40000*0.5523 = $ 22092

f)

interest rate per period = 16%

no. of periods of compounding = 8

so PV factor of 8 years at 16% = 0.3050

so Present value = 40000*0.3050 = $ 12200

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