What is the price today of an investment that will pay the single sum of $20 000 after three and a half years if the discount rate is 7.64% per annum,compounded annually?
A) $2743.37
B) $15 456.89
C) $15 780.00
D) $16 036.48

Question

Quizplus · Accepted Answer

To find the present value of an investment that pays a future sum, we use the formula for present value: $PV = \frac{FV}{(1 + r)^n}$, where $PV$ is the present value, $FV$ is the future value, $r$ is the annual discount rate, and $n$ is the number of years. Plugging in the given values: $PV = \frac{20000}{(1 + 0.0764)^{3.5}}$. Since the interest is compounded annually, we round the years to 3 for calculation, resulting in $PV = \frac{20000}{(1 + 0.0764)^3}$, which calculates to approximately $15,456.89.

What Is the Price Today of an Investment That Will