If the interest rate is 5 percent, the present value of $2,000 to be received two years from today is about
A) $2,010.
B) $1,814.
C) $1,905.
D) $1,980.

Question

Quizplus · Accepted Answer

The present value (PV) can be calculated using the formula:

PV = FV / (1 + r)n

PV = $2,000 / (1 + 0.05)2
PV = $2,000 / 1.1025
PV = $1,813.91 ≈ $1,814 (rounded to the nearest dollar)

Therefore, the best choice is B.

If the Interest Rate Is 5 Percent, the Present Value