An investor has asked for your help with the following time value of money applications. Table 6-4. (Use appropriate factor(s) from the tables provided. Round the PV factors to 4 decimals.) Required: a. What is the present value of $55,000 to be received in four years using a discount rate of 6%? (Round your answer to 1 decimal place.)
b. How much should be invested today at a return on investment of 6% compounded annually to have $55,000 in four years? (Round your answer to 1 decimal place.)
c. If the return on investment was greater than 6% compounded annually, would the amount to be invested today to have $55,000 in four years be more or less than the answer to part b?
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TABLE 6.4 FACTORS FOR CALCULATING THE PRESENT VALUE OF $1 Discount Rate No. of Periods 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 0.9091 0.8264 0.7513 0.6830 0.6209 0.8929 0.7972 0.7118 0.6355 0.5674 0.8772 0.7695 0.6750 0.5921 0.5194 0.8621 0.7432 0.6407 0.5523 0.4761 0.8475 0.7182 0.6086 0.5158 0.4371 0.8333 0.6944 0.5787 0.4823 0.4019 0.980 0.961 0.942 0.924 0.906 0.888 0.871 0.853 0.837 0.820 0.9615 0.9246 0.8890 0.8548 0.8219 0.7903 0.7599 0.7307 0.7026 0.6756 0.9434 0.8900 0.8396 0.7921 0.7473 0.7050 0.6651 0.6274 0.5919 0.5584 0.9259 0.8573 0.7938 0.7350 0.6806 0.6302 0.5835 0.5403 0.5002 0.4632 0.5645 0.5132 0.4665 0.4241 0.3855 0.5066 0.4523 0.4039 0.3606 0.3220 0.4556 0.3996 0.3506 0.3075 0.2697 0.4104 0.3538 0.3050 0.2630 0.2267 0.3704 0.3139 0.2660 0.2255 0.1911 0.3349 0.2791 0.2326 0.1938 0.1615 0.3505 0.3186 0.2897 0.2633 0.2394 0.2366 0.2076 0.1821 0.1597 0.1401 0.804 0.788 0.773 0.758 0.743 0.728 0.714 0.700 0.686 0.673 0.660 0.647 0.634 0.622 0.610 0.552 0.500 0.453 0.410 0.372 0.6496 0.6246 0.6006 0.5775 0.5553 0.5339 0.5134 0.4936 0.4746 0.4564 0.4388 0.4220 0.4057 0.3901 0.3751 0.3083 0.2534 0.2083 0.1712 0.1407 0.5268 0.4970 0.4688 0.4423 0.4173 0.3936 0.3714 0.3503 0.3305 0.3118 0.2942 0.2775 0.2618 0.2470 0.2330 0.1741 0.1301 0.0972 0.0727 0.0543 0.4289 0.3971 0.3677 0.3405 0.3152 0.2919 0.2703 0.2502 0.2317 0.2145 0.1987 0.1839 0.1703 0.1577 0.1460 0.0994 0.0676 0.0460 0.0313 0.0213 0.2176 0.1978 0.1799 0.1635 0.1486 0.1351 0.1228 0.1117 0.1015 0.0923 0.0573 0.0356 0.0221 0.0137 0.0085 0.2875 0.2567 0.2292 0.2046 0.1827 0.1631 0.1456 0.1300 0.1161 0.1037 0.0926 0.0826 0.0738 0.0659 0.0588 0.0334 0.0189 0.0107 0.0061 0.0035 0.1229 0.1078 0.0946 0.0829 0.0728 0.0638 0.0560 0.0491 0.0431 0.0378 0.0196 0.0102 0.0053 0.0027 0.0014 0.1954 0.1685 0.1452 0.1252 0.1079 0.0930 0.0802 0.0691 0.0596 0.0514 0.0443 0.0382 0.0329 0.0284 0.0245 0.0116 0.0055 0.0026 0.0013 0.0006 0.1619 0.1372 0.1163 0.0985 0.0835 0.0708 0.0600 0.0508 0.0431 0.0365 0.0309 0.0262 0.0222 0.0188 0.0160 0.0070 0.0030 0.0013 0.0006 0.0006 0.0003 0.1346 0.1122 0.0935 0.0779 0.0649 0.0541 0.0451 0.0376 0.0313 0.0261 0.0217 0.0181 0.0151 0.0126 0.0105 0.0042 0.0017 0.0007 0.0003 0.0001
