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Chapter 7

Question 6

Discounting

Calculate the present values of the following amounts:

(1) $5,000 payable in 5 years’ time with a rate of 6%

(2) $99,000 payable in 9 years’ time with a rate of 3%

(3) $55,000 payable in 12 years’ time with an interest rate of 4.5%

–n
Using P = F(1 + r)

–5
(1) P = $5,000 × 1.06 = $3,736
–9
(2) P = $99,000 × 1.03 = $75,875
(3) P = $55,000 × 1.045 –12 = $32,432

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