Find the present value of $500 due in five years under each of the following conditions: 12 percent simple rate, compounded annually 12 percent simple rate, compounded semiannually 12 percent simple rate, compounded quarterly 12 percent simple rate, compounded monthly

Find the present value of $500 due in five years under each of the following conditions: 12 percent simple rate, compounded annually 12 percent simple rate, compounded semiannually 12 percent simple rate, compounded quarterly 12 percent simple rate, compounded monthly

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

ChapterA: Appendix - Time Value Of Cash Flows: Compound Interest Concepts And Applications

Section: Chapter Questions

Problem 18E

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Concept explainers

Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.

Question

Find the present value of $500 due in five years under each of the following conditions:

12 percent simple rate, compounded annually
12 percent simple rate, compounded semiannually
12 percent simple rate, compounded quarterly
12 percent simple rate, compounded monthly

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