Max has the opportunity to receive $15,000 now or $20,000 in 5 years. If Max can earn 6% on his investment, what is the approximate present value of the $20,000?

Question

Quizplus · Accepted Answer

The present value (PV) of the $20,000 can be calculated using the formula PV = FV / (1 + r)^n, where FV is the future value ($20,000), r is the annual interest rate (6% or 0.06), and n is the number of years (5). Plugging in the values, we get PV = $20,000 / (1 + 0.06)^5 ≈ $14,945. This calculation shows the value today of $20,000 received in 5 years at a 6% annual interest rate.

Max Has the Opportunity to Receive $15,000 Now or $20,000