Question 1 1 point Compute the present value of 4000 to be r

Question 1 (1 point) Compute the present value of $4,000 to be received annually for the next 10 years with an annual discount rate of 7%. Round your answer to the nearest whole dollar and enter it in the space below as a positive value. Enter only numbers and a comma if the number is larger than three digits (e.g. 1,300), do NOT enter a dollar sign, minus sign, or decimal.

Solution

1.Present value of annuity=Annuity[1-(1+interest rate)^-time period]/rate

=$4000[1-(1.07)^-10]/0.07

=$4000*7.023581541

=$28094(Approx).

2.

We use the formula:
A=P(1+r/200)^2n
where
A=future value
P=present value
r=rate of interest
n=time period.

A=$1000(1+0.04/2)^(2*20)

=$1000*2.208039664

which is equal to

=$2208(Approx).