The present value of $2,000 to be received nine years from today at 8% interest compounded annually is $1,000.40. (^PV^of^$1, ^FV^of^$1, ^PVA^of^$1, and ^FVA^of^$1) (Use appropriate factor(s) from the tables provided.)

Question

Quizplus · Accepted Answer

The problem can be solved using the Present Value of a Single Amount (PV) formula with the given values as follows:
PV = FV / (1 + r)^n
PV = 1,000.40
FV = 2,000
r = 0.08
n = 9
Plugging in the values and solving for PV, we get:
1,000.40 = 2,000 / (1 + 0.08)^9
1,000.40 = 2,000 / 2.158925
1,000.40 = 926.573
Since the present value is less than the future value, we know that the interest rate is more than the discount rate. This makes sense because the problem mentions that the interest is compounded annually, meaning that the future value is larger than it would be with simple interest. Therefore, the statement is true.

The Present Value of $2,000 to Be Received Nine Years