You are promised that when you retire from your current job, in 40 years time, you will receive a gold watch valued at $1 000. If you can invest money at 5% annual interest, what is the present worth of this promise?

Question

Quizplus · Accepted Answer

The present worth of the promise can be calculated using the formula for the present value (PV) of a future amount, which is PV = FV / (1 + r)^n, where FV is the future value ($1,000), r is the annual interest rate (5% or 0.05), and n is the number of years (40). Plugging in the values, we get PV = $1,000 / (1 + 0.05)^40 = $142.08, which rounds to $142.

You Are Promised That When You Retire from Your Current