Assume a relative has promised to pay you $10,000 exactly ten years from today.If you estimate that the market interest rate will average about 6% over the next ten years, approximately how much would the $10,000 be worth to you in today's money, assuming there were no inflation?

Question

Quizplus · Accepted Answer

To find the present value of $10,000 to be received in ten years at an annual discount rate of 6%, we use the present value formula: PV = FV / (1 + r)^n, where PV is the present value, FV is the future value ($10,000), r is the annual interest rate (0.06), and n is the number of years (10). Plugging in the values, we get PV = $10,000 / (1 + 0.06)^10 ≈ $5,600.

Assume a Relative Has Promised to Pay You $10,000 Exactly