The Blackwell Co. expects to receive $135,000 from an insurance settlement four years from now. If the company can earn 11% on its investments, what is the value of the insurance settlement worth
Today?
A) $85,368.94
B) $87,693.43
C) $88,928.68
D) $130,161.39
E) $140,018.48

Question

Quizplus · Accepted Answer

We can use the formula for present value of a future sum of money:

PV = FV / (1 + r)^n

where PV is present value, FV is future value, r is the interest rate, and n is the number of periods.

In this case, FV = $135,000, r = 11%, and n = 4. Plugging in these values, we get:

PV = $135,000 / (1 + 0.11)^4
PV = $88,928.68

Therefore, the value of the insurance settlement today is $88,928.68, which corresponds to choice C.