The present value that will give a future value S in 4 years with interest compounded annually varies inversely as the fourth power of $1 + r$ r, where r is the annual interest rate. If the present value of $3.71 gives a future value
Of $5000, what would be the present value of $10,000? Round to the nearest dollar.
A) $8
B) $5
C) $7
D) $45

Question

Quizplus · Accepted Answer

The present value is inversely proportional to $(1 + r)^4$. If $3.71 gives $5000, then for $10,000, the present value doubles, so $3.71 * 2 = $7.42, rounded to the nearest dollar is $7.

The Present Value That Will Give a Future Value S 1+r1 + r1+r

The Present Value That Will Give a Future Value S $1 + r$