Your parents have promised to give you $25,000 on your wedding day if you wait 10 years to get married. Your sister is getting married today. What amount should she receive in today's dollars to match your gift? The appropriate discount rate is 12%
A) $10,000
B) $22,321
C) $8,049
D) $25,000

Question

Quizplus · Accepted Answer

To match the future value of $25,000 in today's dollars, given a 12% discount rate over 10 years, we use the present value formula: PV = FV / (1 + r)^n, where PV is the present value, FV is the future value ($25,000), r is the annual discount rate (12% or 0.12), and n is the number of years (10). Plugging in the values: PV = $25,000 / (1 + 0.12)^10 ≈ $8,049.

Your Parents Have Promised to Give You $25,000 on Your