The Present Value of $5,000 to Be Received in 4

question 109

True/False

The present value of $5,000 to be received in 4 years at a market rate of interest of 6% compounded annually is $3,636.30. Use the following table, if needed.
$$\begin{array}{l}\text { Present Value of } \$ 1 \text { at Compound Interest }\\\begin{array} { l l l l l l } \text { Periods } & 5 \% & 6 \% & 7 \% & 10 \% & 12 \% \\1 & 0.95238 & 0.94340 & 0.93458 & 0.90909 & 0.89286 \\2 & 0.90703 & 0.89000 & 0.87344 & 0.82645 & 0.79719 \\3 & 0.86384 & 0.83962 & 0.81630 & 0.75132 & 0.71178 \\4 & 0.82270 & 0.79209 & 0.76290 & 0.68301 & 0.63552 \\5 & 0.78353 & 0.74726 & 0.71299 & 0.62092 & 0.56743 \\6 & 0.74622 & 0.70496 & 0.66634 & 0.56447 & 0.50663 \\7 & 0.71068 & 0.66506 & 0.62275 & 0.51316 & 0.45235 \\8 & 0.67684 & 0.62741 & 0.58201 & 0.46651 & 0.40388 \\9 & 0.64461 & 0.59190 & 0.54393 & 0.42410 & 0.36061 \\10 & 0.61391 & 0.55840 & 0.50835 & 0.38554 & 0.32197\end{array}\end{array}$$

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Definitions:

Amortization

The process of gradually paying off a debt over a period of time through planned, periodic payments of principal and interest.

Bond Discount

The difference between the face value of a bond and the price for which it is sold, when the bond is sold for less than its face value.

Operating Activities

Operating activities relate to the primary, day-to-day activities of a business such as selling products, manufacturing, and expenses related to administration.

Net Income

The total profit of a company after all expenses and taxes have been deducted from total revenue.