moodle-2017-2018.calstate International to Manila Ninoy at Home- Cal State LA L

Question

moodle-2017-2018.calstate International to Manila Ninoy at Home- Cal State LA L STATE LA Moodle 2017-2018 Use the table below to answer the following questions Present Value of an Annuity of 1 Present Value of 1 Period 4% 8% 4% 8% 0.9615 0.9259 0.9615 0.9259 20.9246:0.8573 1.8861 1.7833 0.8890:0.7938 2.7751 2.5771 40.85480.7350 3.6299 3.3121 508219 0.6806 4.4518 3.9927 62%),, ,, 0.7903 0.6302 5.2421 4.6229 Assumption: Required annual percentage rate (APR) of return is 8%. If an investment pays you $48000 at the end ot 3 years, what is its present value? Select one: A $37,934 B. $41,937 C. $39,451 D. $43,614

Explanation / Answer

We use the formula:
A=P(1+r/200)^2n[please note that semi annual compounding has to be assumed here]
where
A=future value
P=present value
r=rate of interest
n=time period.

48000=P(1+8/200)^(2*3)

48000=P(1.04)^6

P=48000/1.04^6

=$48000*0.7903

=$37934(Approx)(A)

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