The present value of $1 payable in two years is
A)$1.
B)$1/(1 + 2r).
C)$1/(1 - 2r).
D)$1/(1 + r)2.

Question

Quizplus · Accepted Answer

The formula for present value is PV = FV/(1+r)^n where PV is present value, FV is future value, r is the interest rate, and n is the number of periods. In this case, FV is $1, r is the interest rate, and n is 2. Plugging these values into the formula, we get PV = $1/(1+r)^2. Therefore, the correct answer is D.

The Present Value of $1 Payable in Two Years Is