If someone offers to pay you $500 in year one; $1,000 in year two; $1,500 in year three; and $2,000 in year four, what is the present value of this income stream if the going interest rate is 4%?

Question

Quizplus · Accepted Answer

The present value of each payment is calculated using the formula PV = FV / (1 + r)^n, where FV is the future value, r is the interest rate, and n is the number of years. Summing the present values of all payments gives the total present value of $4,448.44.

If Someone Offers to Pay You $500 in Year One;