What is the value of the following future amount?
a)RM800 to be received 10 years from now discounted back to present at 10%.
To calculate the value of a future amount discounted back to the present, you can use the formula for present value (PV):
PV = FV / (1 + r)^n
Where:
PV = Present Value (the value of the future amount discounted back to the present)
FV = Future Value (the amount you will receive in the future)
r = Discount rate (the rate at which the future value is discounted)
n = Number of periods (the number of years in the future)
In this case, the future amount is RM800 to be received 10 years from now, and the discount rate is 10%.
Using the formula, we can calculate the present value as follows:
PV = 800 / (1 + 0.10)^10
PV = 800 / (1.10)^10
PV = 800 / 2.5937
PV ≈ RM308.38 (rounded to two decimal places)
Therefore, the present value of RM800 to be received 10 years from now discounted back to the present at 10% is approximately RM308.38.