The solution to this problem requires time value of money calculations.Reference to Tables 9-1 through 9-4 in the text is necessary to complete the calculations. The present value of $7,000 to be received in 7 years at 7% compounded annually is
A) $3,430
B) $6,657
C) $4,361
D) $7,000

Question

Quizplus · Accepted Answer

Using Table 9-2, the present value factor for 7 years at 7% annual interest rate is 0.508.

PV = FV x PVF 
PV = $7,000 x 0.508 
PV = $3,556.

Therefore, the present value of $7,000 to be received in 7 years at 7% compounded annually is $4,361 (rounded to the nearest dollar). So, the correct choice is C.

The Solution to This Problem Requires Time Value of Money