What is the present value of a payment of $1,000 two years from now if the interest rate is 6%? A)$2,000/1.06 B)$1000/(1.06)² C)$1000/(1 + 0.06²) D)None of the above are correct.

Question

Quizplus · Accepted Answer

The present value of a future payment is calculated using the formula PV = FV / (1 + r)^n, where FV is the future value, r is the interest rate, and n is the number of periods. Here, FV = $1,000, r = 0.06, and n = 2, so the correct formula is $1000/(1.06)^2.

What Is the Present Value of a Payment of $1,000