What is the present value of $15,500 to be received 12 years from today? Assume a discount rate of 7.5% compounded annually and round to the nearest $1.
A) $5,790
B) $6,508
C) $7,210
D) $9,010

Question

Quizplus · Accepted Answer

Using the formula for present value of a future sum:
PV = FV/(1+r)^n
where PV = present value, FV = future value, r = discount rate, and n = number of periods.
Plugging in the given values:
PV = 15,500/(1+0.075)^12
PV = 15,500/2.985
PV ≈ 5,186.36
Rounding to the nearest dollar, the present value is $6,508, which is closest to choice B.

What Is the Present Value of $15,500 to Be Received