Kristen's grandmother promises to give her $1,000 at the end of five years.How much is the money worth today,assuming Kristen could invest the money and earn a 6% annual rate of return? (Round to the nearest dollar).

Question

Quizplus · Accepted Answer

To calculate the present value of the $1,000, we need to use the present value formula:
PV = FV / (1 + r)^n
where PV is the present value, FV is the future value, r is the interest rate, and n is the number of periods.

In this case, FV = $1,000, r = 6% = 0.06, and n = 5. Plugging in these values into the formula, we get:
PV = $1,000 / (1 + 0.06)^5 = $747.27

Rounding to the nearest dollar, the present value of the $1,000 is $747, which is choice A.

Kristen's Grandmother Promises to Give Her $1,000 at the End