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.