Question

A 22-year old college student has been promised a $1 million check at this 50thbirthday (28years from today). What is the present value of the $1 million today assuming an interest rate of 5%

Answer 1

$255,093.64

Step-by-step explanation:

Calculation to determine the present value of $1 million today

Using Financial calculator

PV = PV (rate, nper, pmt, fv, type)

Where,

FV = $1,000,000

Annual Interest rate = 5%

Number of periods = 28

Let plug in the formula

PV = PV (5%, 28, 0, -1000000, 0)

PV= $255093.64

Therefore the Present value of $1 million today is $255,093.64