A furniture store has a sofa on sale for $399.00,with the payment due one year from today.The store is willing to discount the price at an annual rate of 5% if you pay today.What is the amount if you pay today?
A)$380
B)$399
C)$419
D)$394

Question

Quizplus · Accepted Answer

The present value of the sofa is calculated by discounting the future price of $399 at an annual rate of 5%. The formula is: Present Value = Future Value / (1 + rate). So, $399 / 1.05 = $380.

A Furniture Store Has a Sofa on Sale for $399