An investment is expected to yield $300 in three years,$500 in five years,and $300 in seven years.What is the present value of this investment if the annual interest rate is 5%?
A)$735
B)$865
C)$885
D)$900

Question

Quizplus · Accepted Answer

The present value (PV) is calculated using the formula PV = FV / (1 + r)^n for each cash flow, where FV is the future value, r is the interest rate, and n is the number of years. Calculate each cash flow separately and sum them: PV = 300/(1.05)^3 + 500/(1.05)^5 + 300/(1.05)^7 = 865.

An Investment Is Expected to Yield $300 in Three Years,$500