Question

If your investment earns 6% each year for two years and will be worth $540.80 after two years, its present value is:_____

Answer 1

The present value of an investment that will be worth $540.80 after two years with an annual interest rate of 6% is approximately $481.50.

Step-by-step explanation:

To calculate the present value of an investment that will be worth $540.80 after two years with a 6% annual interest rate, you can use the present value formula, which is PV = FV / (1 + r)n. The future value of the investment after two years is $540.80, and the interest rate is 6%.

Here, PV is the present value, FV is the future value ($540.80), r is the annual interest rate (6% or 0.06), and n is the number of years (2).

Using the formula, we get:
PV = $540.80 / (1 + 0.06)2
PV = $540.80 / (1.06)2
PV = $540.80 / 1.1236
PV = $481.50 approximately

Therefore, the present value of the investment is $481.50.