Leon Smith will receive $84,800 on 5 years from now, from a trust fund established by his father

Accounting Aug 12, 2020

Leon Smith will receive $84,800 on 5 years from now, from a trust fund established by his father. Assuming the appropriate interest rate for discounting is 12% (compounded semiannually), what is the present value of this amount today? (Round factor values to 5 decimal places, e.g. 1.25124. Round answers to the nearest whole dollar, e.g. 5,275.)

Expert Solution

Computation of the present value:-

Future value = Present value*(1+Rate)^n

Here,

Rate = 12%/2 = 6% (semiannual)

n = 5*2 = 10 periods (semiannual)

$84,800 = Present value*(1+6%)^10

Present value = $84,800 / 1.79085

= $47,351.88 Or $47,352

Archived Solution

Unlocked Solution

You have full access to this solution. To save a copy with all formatting and attachments, use the button below.

Already a member? Sign In

Important Note: This solution is from our archive and has been purchased by others. Submitting it as-is may trigger plagiarism detection. Use it for reference only.

For ready-to-submit work, please order a fresh solution below.

Or get 100% fresh solution

Get Custom Quote