If you are scheduled to receive a $10,000 payment in two years and the interest rate is 10%, then the present value of this payment is:
A) $9,000.
B) $8,264.
C) $12,000.
D) $5,000.

Question

Quizplus · Accepted Answer

Using the present value formula: 
PV = FV / (1 + r)^n 
where PV is present value, FV is future value, r is interest rate, and n is the number of years. 
Plugging in the given values: 
PV = 10,000 / (1 + 0.1)^2 
PV = 10,000 / 1.21 
PV = $8,264.46 
Therefore, the present value of the $10,000 payment is $8,264.46.

If You Are Scheduled to Receive a $10,000 Payment in Two