2. If money worth 9 1/2%, find the present value of P 5,500 due in 3 years. Using 360 days

To find the present value of \( P = 5,500 \) due in 3 years at an interest rate of 9 ½% (or 9.5%), we can use the formula for **present value**:

\[
PV = \frac{P}{(1 + r \cdot t)}
\]

Where:
- \( PV \) = present value
- \( P \) = future value (the amount due), which is 5,500
- \( r \) = annual interest rate, which is 9.5% or 0.095
- \( t \) = time in years, which is 3 years

Let’s calculate the present value:

\[
PV = \frac{5,500}{1 + (0.095 \cdot 3)}
\]
\[
PV = \frac{5,500}{1 + 0.285}
\]
\[
PV = \frac{5,500}{1.285}
\]

Now, calculating the result:

\[
PV \approx \frac{5,500}{1.285} \approx 4,280.23
\]

Thus, the present value is approximately **4,280.23**.

Would you like more details or have any questions?

### Related questions:
1. How would the present value change if the interest rate was 8%?
2. What would the present value be if the amount due was 10,000 instead of 5,500?
3. How does using a 360-day year affect the calculation compared to a 365-day year?
4. What happens to the present value if the time period is extended to 5 years?
5. How is simple interest different from compound interest when calculating present value?

**Tip**: The higher the interest rate or the longer the time period, the lower the present value will be.

If money worth 9 1/2%, find the present value of P 5,500 due in 3 years. Using 360 days.

Learn how to calculate the present value of P 5,500 due in 3 years with an interest rate of 9.5% using a 360-day year. This problem covers financial concepts, including the present value formula, simple interest, and how the time period affects the calculation. Suitable for high school students in Grades 10-12.

Math Problem Statement

Solution

Ask a new question for Free

By Image

Math Problem Analysis

Mathematical Concepts

Formulas

Theorems

Suitable Grade Level

Related Recommendation