frank cronin must make a balloon payment $30,000 in 6 years. find the present value of the payment if it…

frank cronin must make a balloon payment $30,000 in 6 years. find the present value of the payment if it includes annual interest of 8.5% compounded annually. the present value is $ (round to the appropriate cent.)

frank cronin must make a balloon payment $30,000 in 6 years. find the present value of the payment if it includes annual interest of 8.5% compounded annually. the present value is $ (round to the appropriate cent.)

Answer

Explanation:

Step1: Identify the present - value formula

The formula for present value $PV$ when compounded annually is $PV=\frac{FV}{(1 + r)^n}$, where $FV$ is the future value, $r$ is the annual interest rate, and $n$ is the number of years.

Step2: Assign values to variables

We have $FV = 30000$, $r=0.085$ (since $8.5%=0.085$), and $n = 6$.

Step3: Calculate the present value

$PV=\frac{30000}{(1 + 0.085)^6}=\frac{30000}{1.085^6}$. First, calculate $1.085^6\approx1.631467$. Then, $PV=\frac{30000}{1.631467}\approx18388.43$.

Answer:

$18388.43$