Suppose you will receive $800 in two years.If the interest rate is 5 percent,then the present value of this future payment is
A)$725.62.It would be higher if the interest rate were higher.
B)$727.28.It would be higher if the interest rate were higher.
C)$725.62.It would be lower if the interest rate were higher.
D)$727.28.It would be lower if the interest rate were higher.

Question

Quizplus · Accepted Answer

The present value is calculated using the formula PV = FV / (1 + r)^n. With FV = $800, r = 0.05, and n = 2, the present value is $725.62. A higher interest rate would decrease the present value.

Suppose You Will Receive $800 in Two Years