Find the present value of the future value.
-$3000, invested for 3 years at 5% compounded monthly
A) $3484.42
B) $2582.93
C) $3469.42
D) $2597.93

Question

Quizplus · Accepted Answer

The present value $PV$ of a future amount $FV$ can be calculated using the formula $PV = \frac{FV}{(1 + \frac{r}{n})^{nt}}$, where $r$ is the annual interest rate, $n$ is the number of compounding periods per year, and $t$ is the time in years. Here, $FV = $3000$, $r = 0.05$, $n = 12$, and $t = 3$. Plugging these values into the formula gives $PV = \frac{3000}{(1 + \frac{0.05}{12})^{12*3}}$, which calculates to approximately $2582.93.

Find the Present Value of the Future Value