How much should an investor invest now to receive £250 in 3 years time if the interest rate is 5 per cent?
A) £200.00
B) £225.45
C) £215.96
D) £291.59

Question

Quizplus · Accepted Answer

We can use the formula for present value of a future amount: 
PV = FV / (1 + r)^n 
where PV is the present value, FV is the future value, r is the interest rate per period, and n is the number of periods. 
In this case, FV = £250, r = 0.05 (5%), and n = 3. 
PV = £250 / (1 + 0.05)^3 = £215.96 (rounded to two decimal places) 
Therefore, the best choice is C).

How Much Should an Investor Invest Now to Receive £250