Answer to Question #245337 in Civil and Environmental Engineering for K31

Question

 If you borrowed money from your friend with simple interest of 12%, find the present worth of P50,000 which is due at the end of 7 months.

 

Answer 1

The present value of a cash flow depends on the interest or discount rate and the length of time between now and the cash flow. When simple interest is used, the present value of a cash flow is equal to the amount of cash flow minus the interest accumulated during the time period.

So,

The answer is P46,729.

Simple interest is used in this case and the annual interest rate is 12 percent.