College

If money can be invested at 5.9% compounded quarterly, which is larger: [tex]$4955[/tex] now or [tex]$7000[/tex] in 6 years? Use present value to decide.

The present value of [tex]$7000[/tex] in 6 years is [tex]$4922.67[/tex].

(Do not round until the final answer. Then round to the nearest cent as needed.)

Answer :

To determine which amount is larger, [tex]$4955 now or $[/tex]7000 in 6 years, we can use the concept of present value. Present value helps us understand how much a future amount of money is worth in today's terms given a specific interest rate.

We're given the present value of [tex]$7000 in 6 years, calculated using a 5.9% interest rate compounded quarterly, is $[/tex]4922.67. Now, we want to compare this present value with the [tex]$4955 we have today.

Step-by-Step Comparison:

1. Identify Present Values:
- Present value of $[/tex]4955 now: [tex]$4955
- Present value of $[/tex]7000 in 6 years: [tex]$4922.67

2. Compare the Present Values:
- We need to compare $[/tex]4955 (which is the present value of the money we have right now) with [tex]$4922.67 (which is the present value of the $[/tex]7000 we will get in 6 years).

3. Determine Which is Larger:
- [tex]$4955 is greater than $[/tex]4922.67.

Therefore, [tex]$4955 now is larger than the present value of $[/tex]7000 in 6 years at the given interest rate.