Question

If Jack earns an 8% after-tax rate of return, $10,000 received in three years is worth how much today (rounded)?

1) $10,000
2) $11,664
3) $9,260
4) $8,570
5) $7,940

Answer 1

The present value of $10,000 received in three years with an after-tax rate of return of 8% is $8,570.

Step-by-step explanation:

To calculate the present value of an amount received in the future, we use the formula:

Present Value = Future Value / (1 + r)^n

Where r is the annual interest rate and n is the number of years. In this case, Jack earns an 8% after-tax rate of return. So, the present value of $10,000 received in three years would be:

Present Value = $10,000 / (1 + 0.08)^3 = $8,570

Therefore, the answer is option 4) $8,570.