What is the present value of a fund that earns 15% on its balance each year, from which $10,000 must be paid a year for 6 years, after which the balance of the fund will be zero?

Answer:The present value of the fund=$25,939.66Step-by-step explanation:Step 1Determine the future value of the fund as shown;Future value(F.V)=payment amounts per year×number of yearswhere;payment amounts per year=$10,000number of years=6 replacing;Future value (F.V)=(10,000×6)=60,000Future value (F.V)=$60,000Step 2Determine the present value (P.V) of the fund as shown;F.V=P.V(1+r)^nwhere;F.V=future valueP.V=present valuer=annual interest raten=number of yearsIn our case;F.V=$60,000P.V=unknownr=15%=15/100=0.15n=6replacing;60,000=P.V(1+0.15)^660,000=P.V(1.15)^6P.V=60,000/{(1.15)^6}P.V=25,939.66The present value of the fund=$25,939.66