Recall the Application about opting for a lump sum of $500,000 for your retirement or $35,000 per year for the rest of your life to answer the following question(s).
-Assume the retiree had a third option: receive a lump sum of $750,000 five years from now. If the interest rate is 4 percent, approximately how much is the future $750,000 to be received in 5 years worth today?
A) $586,445
B) $616,445
C) $630,000
D) $646,555

Question

Quizplus · Accepted Answer

To find the present value of $750,000 to be received in 5 years at an interest rate of 4 percent, we use the formula for the present value: $PV = \frac{FV}{(1 + r)^n}$, where $PV$ is the present value, $FV$ is the future value, $r$ is the annual interest rate, and $n$ is the number of years. Plugging in the values, we get $PV = \frac{750,000}{(1 + 0.04)^5}$, which approximately equals $616,445.

Recall the Application About Opting for a Lump Sum of $500,000