Question

You are promised that when you retire from your current job, in 40 years' time, you will receive a gold watch valued at $1 000. If you can invest money at 5% annual interest, what is the present worth of this promise?

Select one:


a. $142

b. $167

c. $211

d. $156

e. $231

Answer 1

Present Value= $142

Step-by-step explanation:

Giving the following information:

In 40 years, you will receive a gold watch valued at $1,000. The interest rate is 5%.

We have to calculate the value today of $1,000. To do this, we need to use the following formula:

PV= FV/ (1+i)^n

PV= 1,000 / (1.05)^40

PV= $142