An investment promises a payoff of $195 two and one-half years from today.At a discount rate of 7.5% per year,what is the present value of this investment?
A)$162.03
B)$162.75
C)$169.47
D)There is not enough information to answer this question.

Question

Quizplus · Accepted Answer

We can use the formula for present value of a future sum, which is: 
PV = FV / (1 + r)^n 
where PV is the present value, FV is the future value, r is the discount rate, and n is the number of years.
Substituting the given values, we get: 
PV = $195 / (1 + 0.075)^2.5 
PV = $162.75 (rounded to the nearest cent) 
Therefore, the answer is choice B.

An Investment Promises a Payoff of $195 Two and One-Half