What is the present value of a sum of $20000 due in 3 years at a bankers discount of 9%?

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Q: What is the present value of a sum of $20000 due in 3 years at a bankers discount of 9%?

Solution: Bankers Discount = (20000 × 9 × 3) / 100 = $5400. Present Value = 20000 - 5400 = $14600.

Steps: 9

Step 1: Identify the total amount due in the future, which is $20000.
Step 2: Identify the time until the amount is due, which is 3 years.
Step 3: Identify the bankers discount rate, which is 9%.
Step 4: Calculate the bankers discount using the formula: Bankers Discount = (Future Amount × Discount Rate × Time) / 100.
Step 5: Plug in the values: Bankers Discount = (20000 × 9 × 3) / 100.
Step 6: Calculate the bankers discount: 20000 × 9 = 180000, then 180000 × 3 = 540000, and finally 540000 / 100 = 5400.
Step 7: Now, subtract the bankers discount from the future amount to find the present value: Present Value = Future Amount - Bankers Discount.
Step 8: Plug in the values: Present Value = 20000 - 5400.
Step 9: Calculate the present value: 20000 - 5400 = 14600.