QuestionJune 19, 2025

Find the present value of the following future amount. 400,000 at 12% compounded annually for 25 years What is the present value? square (Round to the appropriate cent.)

Find the present value of the following future amount. 400,000 at 12% compounded annually for 25 years What is the present value? square (Round to the appropriate cent.)
Find the present value of the following future amount.
 400,000 at 12%  compounded annually for 25 years
What is the present value?
 square 
(Round to the appropriate cent.)

Solution
4.1(236 votes)

Answer

\28,540.53 Explanation 1. Identify the formula for present value Use the formula for present value: PV = \frac{FV}{(1 + r)^n}, where FV is the future value, r is the interest rate, and n is the number of years. 2. Substitute values into the formula Substitute FV = 400,000, r = 0.12, and n = 25 into the formula: PV = \frac{400,000}{(1 + 0.12)^{25}}. 3. Calculate the denominator Calculate (1 + 0.12)^{25} = 1.12^{25}. 4. Compute the present value Divide 400,000 by the result from Step 3 to find PV.

Explanation

1. Identify the formula for present value<br /> Use the formula for present value: $PV = \frac{FV}{(1 + r)^n}$, where $FV$ is the future value, $r$ is the interest rate, and $n$ is the number of years.<br />2. Substitute values into the formula<br /> Substitute $FV = 400,000$, $r = 0.12$, and $n = 25$ into the formula: $PV = \frac{400,000}{(1 + 0.12)^{25}}$.<br />3. Calculate the denominator<br /> Calculate $(1 + 0.12)^{25} = 1.12^{25}$.<br />4. Compute the present value<br /> Divide $400,000$ by the result from Step 3 to find $PV$.
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