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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Refer to the present value table information on the previous page. What amount should be deposited in a bank today to grow to $1,000 3 years from today?

  1. a. a. $ 1 , 000 0.794
  2. b. $1,000 × 0.926 × 3
  3. c. ($1,000 × 0.926) + ($1,000 × 0.857) + ($1,000 × 0.794)
  4. d. $1,000 × 0.794

To determine

Determine the amount to be deposited by today in a bank to get $1,000 in 3 years.

Explanation

Present value:

The value of today’s amount to be paid or received in the future at a compound interest rate is called as present value.

The following formula can be used to calculate the present value of an amount:

Present value of an amount = Future value×1(1 + interest rate)numberofperiods

(or)

The following formula can be used to calculate the present value of an amount, using table value:

Present value of an amount = Future value×(pn,i)

Determine the amount to be deposited by today in a bank to get $1,000 in 3 years

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