You receive $500 today which you plan to save for two years.Also,in two years you will be given another $500.If the interest rate is 5 percent,what is the present value of the payment of $500 today and the $500 in two years? A)$500(1.05)² + $500/(1.05)² B)$500(1.05)² + $500 C)$500 + $500/(1.05)² D)$500 + $500

Question

Quizplus · Accepted Answer

The present value of $500 today is $500, and the present value of $500 received in two years is $500 discounted back two years at 5%, which is $500/(1.05)^2.

You Receive $500 Today Which You Plan to Save for Two