Problem 1

To solve this problem, use the complete 5% Compound Interest Factor Table in this section.

a. What is the Present Value (F) of a $1,000 Payment to be Made after 5 Years?

P = F x (Present Value Factor) = $1,000 x (0.________) = $_________________

b. What is the Present Value (F) of a $1,000 Payment to be Made after 10 Years?

P = F x (Present Value Factor) = $1,000 x (0.________) = $_________________

c. What is the Present Value (F) of a $1,000 Payment to be Made after 15 Years?

$_________________

Notice that the present value of a future payment continually declines as the payment becomes more remote in time.