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