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21 August, 21:11

Find the present value PV of the given investment. (Round your answer to the nearest cent.) An investment earns 2% per year and is worth $20,000 after 20 months.

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  1. 21 August, 22:17
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    Let P = the PV (principal value).

    n = 12, the monthly compounding interval

    r = 2 = 0.02, the rate

    nt = 20 months

    The value if $20,000 after 20 months, therefore

    P (1 + r/n) ²⁰ = 20000

    1.0339P = 20000

    P = $19,344.86

    Answer: PV = $19,344.86
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