Cleo promises to pay Jacques $1,000 two years from today.If the interest rate is 4 percent,then how much is this future payment worth today?
A)$924.56
B)$931.44
C)$937.87
D)None of the above are correct to the nearest cent.

Question

Quizplus · Accepted Answer

The present value of a future payment is calculated using the formula:PV = FV / (1 + r)^nwhere:PV is the present valueFV is the future valuer is the interest raten is the number of yearsIn this case, the future payment is $1,000, the interest rate is 4%, and the number of years is 2. Plugging these values into the formula, we get:PV = 1000 / (1 + 0.04)^2PV = 1000 / 1.0816PV = $924.56Therefore, the present value of the future payment is $924.56.

Cleo Promises to Pay Jacques $1,000 Two Years from Today