Question

Calculate, to the nearest cent, the present value of an investment that will be worth $1,000 at the stated interest rate after the stated amount of time. HINT [See Quick Example 4.] 5 years, at 1.2% per year, compounded weekly (52 times per year)

Answer 1

Answer:

$941.77  

Explanation:

The formula for present value when interest is compounded on a weekly basis is shown below:

PV=FV/(1+r/t)^(nt)

FV=future cash flow=$1000

r=interest rate=1.2%

t=number of times interest is compounded yearly=52

n=number of years prior to receiving the future amount=5 years

PV=1000/(1+1.2%/52)^(5*52)

PV=1000/(1+0.000230769 )^260

PV=1000/(1.000230769)^260

PV=$941.77