If the interest rate is 6 percent, then the present value of $5,000 received ten years from today is $2,583.34.

Question

If the interest rate is 6 percent, then the present value of $5,000 received ten years from today is $2,583.34.​

Quizplus · Accepted Answer

Using the present value formula, $PV = \frac{FV}{(1 + r)^n}$, where $PV$ is the present value, $FV$ is the future value ($5,000), $r$ is the interest rate (6% or 0.06), and $n$ is the number of periods (10 years), the calculation would be $PV = \frac{5000}{(1 + 0.06)^{10}}$, which does not equal $2,583.34. The correct calculation gives a different result.

If the Interest Rate Is 6 Percent, Then the Present