Compute the present value of a $2,500 deposit in year 4 and another $10,000 deposit at the end of year 8 if interest rates are 15 percent.
A) $4,211.26
B) $4,572.19
C) $4,698.40
D) $4,901.57

Question

Quizplus · Accepted Answer

The present value is calculated by discounting each future cash flow back to the present using the formula PV = FV / (1 + r)^n. For the $2,500 in year 4: PV = 2500 / (1 + 0.15)^4 = $1,428.57. For the $10,000 in year 8: PV = 10000 / (1 + 0.15)^8 = $3,269.83. Adding these gives a total present value of $4,698.40.

Compute the Present Value of a $2,500 Deposit in Year