math
posted by Amanda on .
Find the present value of $31,000 due in 4 yr at the given rate of interest.
(a) 6%/year, compounded quarterly
$ ?
(b) 3%/year, compounded quarterly
$ ?

a. P = Po(1+r)^n.
P = $31,000. = Value in 4 yrs.
Po = Initial value.
r = (6%/4) / 100% = 0.015 = Quarterly %
rate expressed as a decimal.
n = 4Comp./yr * 4yrs = 16 Compounding
periods.
P = Po(1.015)^16 = $31,000.
Po*1.26899 = 31000
Po = $24,428.96 = Present value.
b. Same procedure as "a".