The present value of a sum of money is the amount that must be invested now, at a given rate of interest, to produce the desired sum at a later date.Find the present value of $1,000 if interest is paid at
A rate of 6% per year, compounded semiannually, for 7 years.
A)$617.78
B)$69.34
C)$661.12
D)$444.01
E)$665.06

Question

Quizplus · Accepted Answer

The correct answer is C.The present value of a sum of money is the amount that must be invested now, at a given rate of interest, to produce the desired sum at a later date.The formula for the present value of a sum of money is:PV = FV / (1 + r/n)^(n*t)where:PV is the present valueFV is the future valuer is the annual interest raten is the number of times per year that interest is compoundedt is the number of yearsIn this case, we have:FV = $1,000r = 6% = 0.06n = 2 (since interest is compounded semiannually)t = 7Plugging these values into the formula, we get:PV = $1,000 / (1 + 0.06/2)^(2*7)PV = $1,000 / (1.03)^14PV = $661.12Therefore, the present value of $1,000 if interest is paid at a rate of 6% per year, compounded semiannually, for 7 years is $661.12.

The Present Value of a Sum of Money Is the Amount