If $4,000 is to be paid now. What amount would be equivalent 97 days earlier given an interest rate of 4.25% per year?
A) $3,955.33
B) $3,844.22
C) $3,733.11
D) $3,622.00
E) $4,421.67

Question

Quizplus · Accepted Answer

To find the equivalent amount 97 days earlier, we use the formula for calculating the present value: $PV = \frac{FV}{(1 + r)^n}$, where $PV$ is the present value, $FV$ is the future value ($4,000), $r$ is the interest rate per period (4.25% per year or 0.0425), and $n$ is the number of periods. Since the interest rate is annual, we convert 97 days into years by dividing by 365: $n = \frac{97}{365}$. Plugging the values into the formula gives: $PV = \frac{4000}{(1 + 0.0425)^{\frac{97}{365}}}$, which calculates to approximately $3,955.33.

If $4,000 Is to Be Paid Now