What Is the Present Value of $7,500 to Be Received

question 12

Multiple Choice

What is the present value of $7,500 to be received in 8 years if 6% is the proper discount rate?

• A)$46,573.45
• B)$4,705.59
• C)$4,726.27
• D)$11,953.86

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Definitions:

Equal Annual Installments

A repayment structure where the borrower pays back a loan in fixed amounts each year until the full amount is repaid.

Compounded Annually

A method of calculating interest where the interest earned each year is added to the principal, so the balance doesn't merely grow, it grows at an increasing rate.

Interest

Money paid regularly at a particular rate for the use of money lent, or for delaying the repayment of a debt.

Outstanding Balance

It signifies the total amount still owed on a loan or credit line, factoring in both principal and interest, at a certain point in time.