Dean Martin's income was $1000 in 1950. If the annual interest rate was 5 per cent, then the present value of his 1950 income in the year 2000 would be:

Question

Quizplus · Accepted Answer

Using the compound interest formula, we can calculate the present value of Dean Martin's income in 2000:

PV = FV / (1 + r)^n

Where: 
PV = Present Value 
FV = Future Value (Dean Martin's income in 1950) 
r = Annual interest rate (5%) 
n = Number of years (2000 - 1950 = 50 years)

Plugging in the numbers:

PV = 1000 / (1 + 0.05)^50 
PV = $11,467.41

Therefore, the present value of Dean Martin's income in 2000 would be $11,467.41, which is closest to answer choice D, $114,674.

Dean Martin's Income Was $1000 in 1950