The present value of $475 received 3 years in the future would be calculated as which of the following when the interest rate is 6 percent? A)475/(1.6)³ B)475/(1.06)⁵ C)475 × 1.6 × 3 D)3.06/475

Question

Quizplus · Accepted Answer

The present value can be calculated using the formula: 
Present value = Future value / (1 + r)ⁿ 
where r is the interest rate and n is the number of years. 
Substituting the values, 
Present value = 475 / (1 + 0.06)³ 
= 398.19 (approximately) 
Therefore, the correct choice is B.

The Present Value of $475 Received 3 Years in the Future