You receive $500 today which you plan to save for two years. Also, in two years you will be given another $500. If the interest rate is 5 percent, what is the present value of the payment of $500 today and the $500 in two years?
A) $5001.05)2 + $500/1.05)2
B) $5001.05)2 + $500
C) $500 + $500/1.05)2
D) $500 + $500

Question

Quizplus · Accepted Answer

The present value of $500 today is $500, and the present value of $500 received in two years is $500 divided by (1.05)^2.

You Receive $500 Today Which You Plan to Save for Two