What is the present value of a $200 payment made in 3 years when the discount rate is 8 percent?
A)$150.00
B)$158.77
C)$251.94
D)$515.42

Question

Quizplus · Accepted Answer

We can use the formula for present value of a future payment:

PV = FV / (1 + r)^n

where PV is the present value, FV is the future value (in this case $200), r is the discount rate (8% or 0.08), and n is the number of years (3).

Plugging in the numbers, we get:

PV = 200 / (1 + 0.08)^3 
PV = 200 / 1.259712 
PV = $158.77

Therefore, the present value of a $200 payment made in 3 years at a discount rate of 8% is $158.77.

Option A is incorrect because it is too low. 
Option C is incorrect because it is too high. 
Option D is incorrect because it is much too high.

What Is the Present Value of a $200 Payment Made