Question

An investment will mature for 5 years with a discount rate of 10%. It's value after that time is $500. What is the present value?

PVIF10%,5 = .6209

Enter your answer in currency format, to the nearest penny (hundredth).

Answer 1

Answer: $310 ( nearest hundredth)

Explanation:

Given the following:

Future value (FV) = $500

DISCOUNT RATE = 10%

PERIOD = 5YEARS

PRESENT VALUE =?

USING THE FINANCIAL CALCULATOR, THE PRESENT VALUE IS 310.46

Also,

PVIF10%,5 = .6209

Therefore, present value (PV)

= FUTURE VALUE × 0.6209

= $500 × 0.6209

= $310.45