What is the present value of a $500 payment in one year when the discount rate is 5 percent?
A) $475.00
B) $476.19
C) $500.00
D) $525.00

Question

Quizplus · Accepted Answer

The present value (PV) of a future payment can be calculated using the formula PV = FV / (1 + r)^n, where FV is the future value, r is the discount rate, and n is the number of periods. Here, FV = $500, r = 5% or 0.05, and n = 1. Thus, PV = $500 / (1 + 0.05)^1 = $500 / 1.05 = $476.19.

What Is the Present Value of a $500 Payment in One