You are due to receive a lump-sum payment of $1,650 in five years.Assuming a discount rate of 3.5 percent interest, what would be the value of the payment in Year 3?
A)$1,488.21
B)$1,540.29
C)$1594.20
D)$1,389.26
E)$1,296.89

Question

Quizplus · Accepted Answer

To find the value of the payment in Year 3, we need to discount the future value of $1,650 back two years (from Year 5 to Year 3) using the formula for present value: PV = FV / (1 + r)^n. Here, FV = $1,650, r = 0.035, and n = 2. Calculating this gives us $1,540.29.

You Are Due to Receive a Lump-Sum Payment of $1,650