The present value of $300 received 5 years in the future would be calculated as which of the following when the interest rate is 5%?

Question

Quizplus · Accepted Answer

The present value formula 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 years. So, in this case, PV = 300 / (1 + 0.05)^5, which simplifies to PV = 300 / 1.27628, or approximately PV = $235.07. Choice B is the closest to this calculation.

The Present Value of $300 Received 5 Years in the Future