Answer:
[tex] 5033.83 = PV (1+\frac{i}{1})^{1*21}[/tex]
And we can solve for PV and we got:
[tex] PV = \frac{5083.83}{(1+0.08)^{21}}=1009.932[/tex]
So then the closest value for this case should be:
D. $1,000
Explanation:
We assume that we have compounding interest.
For this case we can use the future value formula given by:
[tex] FV= PV (1+\frac{i}{n})^{nt}[/tex]
Where:
FV represent the future value desired = 5033.83
PV= represent the present value that we need to find
i = the interest rate that we desire to find in fraction = 8% =0.08
n = number of times that the interest rate is compounding in 1 year, since the rate is annual then n=1
t = represent the number of years= 21 years
So then we can replace into the formula and we have:
[tex] 5033.83 = PV (1+\frac{i}{1})^{1*21}[/tex]
And we can solve for PV and we got:
[tex] PV = \frac{5083.83}{(1+0.08)^{21}}=1009.932[/tex]
So then the closest value for this case should be:
D. $1,000
