Which of the following is the correct expression for finding the present value of a $500 payment two years from today if the interest rate is 4 percent? A)$500/(1.04)² B)$500 - 500(1.04)² C)$500 - $500/(.04)² D)None of the above is correct.

Question

Quizplus · Accepted Answer

The formula for finding the present value of a future payment is:
Present Value = Future Value / (1 + interest rate)^number of periods

In this case, the future value is $500, the interest rate is 4%, and the number of periods is 2.

So, the present value = $500 / (1 + 0.04)^2
= $500 / 1.0816
= $462.35 (rounded to the nearest cent)

Option A is the correct expression for this calculation.

Which of the Following Is the Correct Expression for Finding