What is the present value of your trust fund if it promises to pay you $50,000 on your 30^th birthday (7 years from today) and earns 10 percent compounded annually? A)$25,000.00 B)$25,657.91 C)$28,223.70 D)$29,411.76 PV =

Question

Quizplus · Accepted Answer

Using the formula for present value of a future lump sum: 
PV = FV/(1+r)^n 
where FV is the future value, r is the interest rate, and n is the number of periods.

In this case, FV = $50,000, r = 10%, and n = 7. 
PV = $50,000/(1+0.10)^7 
PV = $25,657.91

Therefore, the present value of the trust fund is $25,657.91. Choice B is the correct answer.

What Is the Present Value of Your Trust Fund If