Determine the present value of $61,000 to be received in one year, at 6% compoun

Question

Determine the present value of $61,000 to be received in one year, at 6% compounded annually (rounded to nearest dollar). Use the following table, if needed.

Present Value of $1 at Compound Interest

Select the correct answer.

$57,009

$61,000

$54,464

$57,547

Periods 5% 6% 7% 10% 12% 1 0.95238 0.94340 0.93458 0.90909 0.89286 2 0.90703 0.89000 0.87344 0.82645 0.79719 3 0.86384 0.83962 0.81630 0.75132 0.71178 4 0.82270 0.79209 0.76290 0.68301 0.63552 5 0.78353 0.74726 0.71299 0.62092 0.56743 6 0.74622 0.70496 0.66634 0.56447 0.50663 7 0.71068 0.66506 0.62275 0.51316 0.45235 8 0.67684 0.62741 0.58201 0.46651 0.40388 9 0.64461 0.59190 0.54393 0.42410 0.36061 10 0.61391 0.55840 0.50835 0.38554 0.32197

Explanation / Answer

Solution:

Amount to be received in 1 year = $61,000

Discount rate = 6%

Present value of amount to be received = $61,000 * PV factor at 6% for 1 year = $61,000 * 0.94340 = $57,547

Hence last option is correct.

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