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Present Value Factor for Reversion of $1 -Using Only the Information in the Table Above, Approximately How

question 21

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Present Value Factor for Reversion of $1
 Perlod 6%7%8%9%10%1.943396.934579.925926.917431.9090912.889996.873439.857339.841680.8264463.839619.816298.793832.772183.7513154.792094.762895.713503.708425.6830135.747258.712986.680583.644931.6209216.704961.666643.630170.596267.564474\begin{array}{cccccc}\text { Perlod } & 6 \% & 7 \% & 8 \% & 9 \% & 10 \% \\\hline 1 & .943396 & .934579 & .925926 & .917431 & .909091 \\2 & .889996 & .873439 & .857339 & .841680 & .826446 \\3 & .839619 & .816298 & .793832 & .772183 & .751315 \\4 & .792094 & .762895 & .713503 & .708425 & .683013 \\5 & .747258 & .712986 & .680583 & .644931 & .620921 \\6 & .704961 & .666643 & .630170 & .596267 & .564474\end{array}
-Using only the information in the table above, approximately how much would you pay today for an investment that pays $0 annual interest, but earns 8% interest over the next four years and has a face value at maturity of $13,500?


Definitions:

Rate of Inflation

The percent change in the price level of goods and services in an economy over a period of time, usually measured annually.

Interest

Interest is the charge for borrowing money typically expressed as an annual percentage rate, or the income earned from lending money.

Consumption

Families or individuals partaking in the use of goods and services.

Interest Rate

The percentage of a sum of money charged for its use, often expressed on an annual basis.

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