Calculate a time value of money problem.
Compute the present value of $5,000 received in 6 years, using a discount rate of 2%.
Equation 4.14:
PV0=FVn×(1+r)−n
Write:
- Write out each step you used to solve the problem you were assigned, and provide the solution to the problem as well.
- Present your final solution as a decimal approximation carried out to the second decimal point (e.g., $000.00).
- Explain the meaning of the problem and your solution in your own words.
- Explain your answers to the following questions:
- If the rate in the problem was higher, would the solution be higher or lower?
- If the time period in the problem was shorter, would the solution be higher or lower?
- Describe an element of this problem that was challenging to you.
- Ask at least one question about time value of money mathematics.
Need help with your calculations? Check out the video included.
https://youtu.be/vJRD2q9kFeQ
