What is the present value of $100,000 received in fifteen years with an annual discount rate of 5% compounded monthly?
A) $ 48,102
B) $ 47,310
C) $207,893
D) $ 25,000

Question

Quizplus · Accepted Answer

The present value (PV) of a future amount can be calculated using the formula PV = FV / (1 + r/n)^(nt), where FV is the future value, r is the annual interest rate, n is the number of compounding periods per year, and t is the time in years. Here, FV = $100,000, r = 0.05, n = 12 (monthly compounding), and t = 15. Plugging these values into the formula gives PV = $100,000 / (1 + 0.05/12)^(12*15) ≈ $47,310.

What Is the Present Value of $100,000 Received in Fifteen