Which of the following amounts is closest to the present value of a payment of $21,000 three years from now if the effective annual interest rate is 4%?
A) $18,669
B) $18,658
C) $19,218
D) $18,480
E) $17,951

Question

Quizplus · Accepted Answer

The present value (PV) of a future amount can be calculated using the formula PV = FV / (1 + r)^n, where FV is the future value, r is the annual interest rate, and n is the number of years. Plugging in the given values: PV = $21,000 / (1 + 0.04)^3 = $21,000 / 1.124864 = $18,669 (approximately).

Which of the Following Amounts Is Closest to the Present