Answer:
$14,047.16
Explanation:
Present value (PV) refers to the value of cash flow expected in the future. This indicates that a cash that is gotten today is worth more than the worth of cash expected in the future.
The following formula is used to calculate the PV of a stream of savings to be made for a number of period in the future:
PV = C × {[1 − (1+r)^-n] ÷ r} .......................................... (1)
Where PV = present value
C = cash flow amount to be saved = $2,000
r = discount rate = 7% = 0.07
n = number of period = 10 years
The figures above can therefore in equation (1) as follows:
PV = $2,000 × {[1 − (1+0.07)^-10] ÷ 0.07}
= $2,000 × 7.023581541
= $14,047.16
Therefore, $14,047.16 will be made at the end of the tenth year if the first deposit is made today.
