Question

You are purchasing a used car and will make 5 annual payments of $3,500 starting one year from today. If your funds could be invested at 9%, what is the present value of the car? (Round the final answer to the nearest dollar.

Answer 1

Answer:

The Present Value (PV) of the car is $13,614

Explanation:

Computing the Present Value of the car using the excel formula of Present Value which is as:

=PV(rate,nper,PMT,fv,type)

where

rate is 9%

nper is number of years is 5

PMT is annual payments which is of -$3,500

FV is Future value which is not given

Type is 0

Putting the values above:

=PV(9%,5,-3500,0)

= $13,613.78 or $13,614

Therefore, the present value of the car amounts to $13,614

Answer 2

The Present Value (PV) of the car is $13,614

How to compute Present  Value?

Computing the Present Value of the car using the excel formula of Present Value which is as:

Then = PV (rate, n per, PMT, fv, type)

where as,

After that rate is 9%

Then n per is number of years is 5

Now, the PMT is annual payments which is of -$3,500

Then FV is Future value which is not given

But Type is 0

Then we are putting the values above:

Now put the value is = PV(9%,5,-3500,0)

After that = $13,613.78 or $13,614

Thus, the present value of the car amounts is to $13,614

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