What is the present value of a payment of $2,000 to be received two years from today if the interest rate is 5%?
A)$2205
B)$2200
C)$1818.18
D)$1814.06

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 value is $2,000, the interest rate is 5%, and the number of years is 2. Plugging these values into the formula, we get:PV = 2000 / (1 + 0.05)^2PV = 2000 / 1.1025PV = $1814.06Therefore, the present value of the payment is $1814.06.

What Is the Present Value of a Payment of $2,000