If the interest rate is 10 percent, what is the present value of $25,000 received two years from now?

Question

Quizplus · Accepted Answer

The present value of the payment can be calculated using the formula:

PV = FV / (1 + r)^n

where PV is the present value, FV is the future value, r is the interest rate, and n is the number of periods.

In this case, FV = $25,000, r = 10%, and n = 2.

PV = $25,000 / (1 + 0.10)^2
PV = $20,661.16

Therefore, the best choice is B, as it is the closest to the calculated present value.

If the Interest Rate Is 10 Percent, What Is the Present