If the interest rate is 5%, $10 received at the end of 7 years is worth how much today? A)100/(0.05)⁷. B)100/(1 + 0.05)⁷. C)100/(1 + 5)⁷. D)100.

Question

Quizplus · Accepted Answer

The present value can be calculated using the formula PV = FV/(1+r)^n, where PV is present value, FV is future value, r is the interest rate, and n is the number of years. Plugging in the values, we get PV = 10/(1+0.05)^7 = 6.1396. Therefore, the present value of $10 received at the end of 7 years with an interest rate of 5% is $6.1396. The closest answer choice is B, which is 100/(1+0.05)^7, and it gives the same result. The other answer choices are either not divided by (1+r)^n or use incorrect values for r and n.

If the Interest Rate Is 5%, $10 Received at the End