Problema Solution

Find the present value of 1,400,000 if interest is paid at a rate of 7.7% compounded monthly for 10 years.

The present value is $__ (Round to the nearest cent as needed)

Answer provided by our tutors

Hi,

 

The compound interest formula is A = P(1+(r/n))^(n*t) with A is the future value, P the present value, r the annualrate of interest, n the number of times the interest is compound per year and t is the number of year.

 

applying ths formula we obtain: 1,400,000 = P*(1+(0.077/12) )^(12*10)

equivalent to 1,400,000 = P*2.1544

equivalent to P = 1,400,000/2.1544

finally the present value is P = 649814.81

 

good luck