If you require a 5% annual rate of return, the present value of $1,000 received three years from today is given by: A) $1,000 x (1 +0.05)³ B) $1,000 / (0.05)³ C) $1,000 / (1 + 0.05)³ D) (1 + 0.05)³ / $1,000

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Quizplus · Accepted Answer

The present value of a future sum of money is calculated by dividing the future sum by (1 + rate of return) raised to the number of periods. In this case, it's $1,000 / (1 + 0.05)^3.

If You Require a 5% Annual Rate of Return, the Present