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math

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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

$ ?

  • math - ,

    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".

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