Which of the following best expresses the present value of $500 that you have to wait four years and three months to receive?
A)($500/4.25) × (1 + i)
B)$500 × 4.25 × (1 + i)
C)$500/(1 + i)4.25
D)($500/4) × (1 + i)3

Question

Quizplus · Accepted Answer

The present value can be calculated using the formula:
PV = FV/(1+i)^n
Here, FV = $500, n = 4.25 years (since it is over 4 years and 3 months), and we need to solve for i.
So, PV = $500/(1+i)^4.25
Option C provides the correct formula to calculate PV.

Which of the Following Best Expresses the Present Value of $500