What is the present value of a payment of $100 to be made one year from today?
A) $100*1 + r)
B) $100/1 + r)
C) $100 - $100 r
D) $100 - 1 + r)/$100

Question

What is the present value of a payment of $100 to be made one year from today?
A) $100*1 + r) 
B) $100/1 + r) 
C) $100 - $100 r 
D) $100 - 1 + r)/$100

Quizplus · Accepted Answer

The present value formula for a single payment is PV = FV/(1+r), where FV is the future value and r is the discount rate. In this case, FV is $100 and the payment is due one year from today, so we need to discount it back to its present value. Using the formula, we get PV = $100/(1+r). Choice B is the only option that correctly reflects this formula.

What Is the Present Value of a Payment of $100