Page 48 - FM Integrated WorkBook STUDENT 2018-19
P. 48

Chapter 3





                  Question 5



                  Discounting using tables

                  Calculate the present value of $40,000 discounted at 9% for 4 years.






                  PV = future value × discount factor

                  Using the formula

                                        -4
                  PV = $40,000 × 1.09  = $28,337

                  From tables, discount factor for 9% and 4 years is 0.708

                  PV = $40,000 × 0.708 = $28,320



                  NB: the only difference is roundings.  Either method is acceptable for the exam.





                  Illustrations and further practice



                  Now try TYU question 5 from Chapter 3



























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