Answer:
$85,734
Step-by-step explanation:
We have been given that Karel sells goods to customers in exchange for a $100,000 non-interest-bearing note due in 2 years. The interest rate on this type of loan is 8%. We are asked to find the present value of the note.
[tex]PV=FV\frac{1}{(1+r)^n}[/tex], where,
PV = Present Value,
FV = Future Value,
r = Interest rate in decimal form,
n = Time
Let us convert given interest rate into decimal form as:
[tex]8\%=\frac{8}{100}=0.08[/tex]
[tex]PV=100,000*\frac{1}{(1+0.08)^2}[/tex]
[tex]PV=\frac{100,000}{(1.08)^2}[/tex]
[tex]PV=\frac{100,000}{1.1664}[/tex]
[tex]PV=85733.882030[/tex]
[tex]PV\approx 85,734[/tex]
Therefore, the present value of the note is $85,734.
