What is the present value of €20,000 payable in 10 years at a 2.5% per annum discount rate?

What is the present value of €20,000 payable in 10 years at a 2.5% per annum discount rate?

• A. €9,700
• B. €12,280
• C. €15,620
• D. €16,400

Answer: (C)

To calculate the present value of €20,000 payable in 10 years at a 2.5% per annum discount rate, the present value formula is used: \[ PV = \frac{FV}{(1 + r)^n} \] Where: - \( PV \) is the present value, - \( FV \) is the future value (€20,000), - \( r \) is the discount rate (2.5% or 0.025), - \( n \) is the number of years until payment (10). Plugging in the values: \[ PV = \frac{€20,000}{(1 + 0.025)^{10}} \] Calculating the denominator: \[ (1 + 0.025)^{10} = (1.025)^{10} \approx 1.28008 \] Now substituting this back into the formula: \[ PV = \frac{€20,000}{1.28008} \approx €15,620.36 \] Rounding this value, we arrive at approximately €15,620. Therefore, the present value of €20,000 payable in 10 years at a discount rate of 2.5

To calculate the present value of €20,000 payable in 10 years at a 2.5% per annum discount rate, the present value formula is used:

[ PV = \frac{FV}{(1 + r)^n} ]

Where:

• ( PV ) is the present value,

• ( FV ) is the future value (€20,000),

• ( r ) is the discount rate (2.5% or 0.025),

• ( n ) is the number of years until payment (10).

Plugging in the values:

[ PV = \frac{€20,000}{(1 + 0.025)^{10}} ]

Calculating the denominator:

[ (1 + 0.025)^{10} = (1.025)^{10} \approx 1.28008 ]

Now substituting this back into the formula:

[ PV = \frac{€20,000}{1.28008} \approx €15,620.36 ]

Rounding this value, we arrive at approximately €15,620.

Therefore, the present value of €20,000 payable in 10 years at a discount rate of 2.5