Respuesta :
Answer:
a. $757.60
b. $395.00
Explanation:
We have to applied the present value function which is shown in the attachment
a. Given that,
Future value = $1,000
Rate of interest = 5%
NPER = 14 years
PMT = $0
The formula is shown below:
= -PV(Rate;NPER;PMT;FV;type)
So, after solving this, the present value is $757.60
b. Given that,
Future value = $1,000
Rate of interest = 10%
NPER = 14 years
PMT = $0
The formula is shown below:
= -PV(Rate;NPER;PMT;FV;type)
So, after solving this, the present value is $395.00
It shows a inverse relationship between the present value and the interest rate. The higher the interest rate, the lower is the present value and the lower the interest rate, the higher is the present value.
