Final answer:
The question pertains to the present value calculation of a future payment considering a 5% annual interest rate. The provided formula demonstrates how to calculate it, and it exemplifies a financial concept encountered in high school mathematics.
Step-by-step explanation:
The question asks about calculating the present value of a sum of money (q) that will be received in the future, using a given annual interest rate (5%). To determine the present value, we apply the formula for the calculation of the future value:
Future Value = Present Value × (1 + Interest Rate)Number of Years (t)
However, since we want to find the present value, we need to rearrange the formula:
Present Value = Future Value / (1 + Interest Rate)Number of Years (t)
For a payment from a firm that will be received in six years, we will use the above formula, plugging in the 5% interest rate and the number of years (6) to find the present value. This is important when calculating what amount of money one would need to invest today at a given interest rate so that it grows to the desired future amount. For example, using a simple interest rate of $5 (or 5%), we can calculate the total future amount with the given values.