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Problem 4-17 Present Value for Various Compounding Periods Find the present value of $475 due in the...

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Finance

Problem 4-17
Present Value for Various Compounding Periods

Find the present value of $475 due in the future under each ofthe following conditions. Do not round intermediate calculations.Round your answers to the nearest cent.

  1. 4% nominal rate, semiannual compounding, discounted back 5years
    $   
  2. 4% nominal rate, quarterly compounding, discounted back 5years
    $   
  3. 4% nominal rate, monthly compounding, discounted back 1year
    $  

Answer & Explanation Solved by verified expert
3.8 Ratings (486 Votes)

a.
A = P*(1+i)^-n Where,
= 475*(1+0.02)^-10 A Present value
= $ 389.67 P $        475
i 4% / 2 = 0.02
n 5 x 2 = 10
b.
A = P*(1+i)^-n Where,
= 475*(1+0.01)^-20 A Present value
= $ 389.28 P $        475
i 4% / 4 = 0.01
n 5 x 4 = 20
c.
A = P*(1+i)^-n Where,
= 475*(1+0.003333)^-12 A Present value
= $ 456.41 P $        475
i 4% / 12 = 0.003333
n 1 x 12 = 12

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