Question

What is the present value of​ $500.00 to be paid in two years if the interest rate is 5​ percent?

a. ​$476.25
b. ​$500.00
c. ​$550.00
d. ​$453.51?

Answer 1

The present value by definition is:
VP = VF / (1 + i) ^ n
Where,
VF = Future value
I = interest
n = Number of years
Substituting the values:
VP = (500) / (1+ (0.05)) ^ (2)
VP = 453.51
answer:
the present value of $ 500.00 to be paid in two years if the interest rate is 5 percent is
d. $ 453.51