The present value (PV) of a payment one year in the future (FV), given an interest rate (r), is given by the equation:
A)PV = 1 / FV.
B)PV = FV / 1.
C)PV = FV / (1 + r).
D)PV = FV × (1 + r).

Question

Quizplus · Accepted Answer

The present value (PV) is equal to the future value (FV) divided by (1 + r), where r is the interest rate. Therefore, the correct equation is PV = FV / (1 + r). Choice C is the only option that includes the correct formula.

The Present Value (PV) of a Payment One Year in the Future