If the interest rate is 4 percent,the present value of $500 received at the end of four years is:
A) $427.40.
B) $431.71.
C) $416.41.
D) $432.68.

Question

Quizplus · Accepted Answer

To calculate the present value of $500 received at the end of four years, we need to use the following formula:

Present Value = Future Value / (1 + r)n

Where:

r = the annual interest rate
n = the number of years
Future Value = $500

So, using the given interest rate of 4 percent, we get:

Present Value = $500 / (1 + 0.04)4
Present Value = $500 / 1.1699
Present Value = $427.40 (rounded to two decimal places)

Therefore, the answer is choice A) $427.40.

If the Interest Rate Is 4 Percent,the Present Value of $500