Question

Compute the present value of a $3,500 deposit in year 1, and another $3,000 deposit at the end of year 3 if interest rates are 10 percent. (Do not round intermediate calculations and round your final answer to 2 decimal places.)

Answer 1

Answer:

The present value is $5,435.76

Explanation:

The computation of the present value is shown below:

= [Deposit made in year 1 ÷ (1 + rate of interest)^time period + [deposit made at the end of year 3 ÷ (1 + rate of interest)^time period

= [$3,500 ÷  (1 + 0.10)^1] + [$3,000 ÷ (1 + 0.10)^3]

= $3,181.82 + $2,253.94

= $5,435.76

Hence, the present value is $5,435.76

we simply applied the above formula

And, the same is to be considered