Using the Following Partial Table of Present Value of $1

question 61

Multiple Choice

Using the following partial table of present value of $1 at compound interest, compute the present value of $20,000 (rounded to nearest dollar) to be received one year from today, assuming an earnings rate of 15%. ? $$\begin{array} { c c c c } \text { Year } & 10 \% & 15 \% & 20 \% \\\hline 1 & 0.909 & 0.870 & 0.833 \\2 & 0.826 & 0.756 & 0.694 \\3 & 0.751 & 0.658 & 0.579 \\4 & 0.683 & 0.572 & 0.482 \\5 & 0.621 & 0.497 & 0.402 \\6 & 0.564 & 0.432 & 0.335 \\7 & 0.513 & 0.376 & 0.279 \\\hline\end{array}$$

• A) $17,400
• B) $17,000
• C) $20,000
• D) $15,451

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Definitions:

Autonomous Consumption

Represents the amount of consumption that occurs no matter the level of disposable income, indicating basic living expenses.

Disposable Income

The amount of income available to households after taxes and social security charges have been deducted, available for spending or saving.

Consumption

The total amount of goods and services consumed by households and organizations within an economy.

Autonomous Consumption

The level of consumption that occurs when income is at zero, representing the expenditures that consumers must make even when they have no income.