Question

Please help. i get two diff ans.

If the interest rate is 3% and a total of $4,370.91 will be paid to you at the end of 3 years, what is the present value of that sum? A) $3900, B) $3947 C) $3,977.40 D) $4000,

Answer 1

Present value = Future value / [1+ {Interest rate}]^n where n is the duration of investment.----------(1) Given : Interest rate = 3%, Duration, n = 3 years. Plugging in the values in the above equation (1) Present value = (4370.91) / (1+3%)^3 Present value = 4370.91/(1.03^3) Present value = 4370.91/1.0927 Present value = $ 4000.