Question

What is the present value of a $1,600 payment made in five years when the discount rate is 10 percent?

Answer 1

Present value is $993.47

Explanation:

PV = present value

Fv = future value = $1,600

Discount (i) = 10%

N = Years = 5

The formula for this is given by:

PV = FV/(1 + i)^N

PV = $1600/(1 + 0.10)^5

PV = $1600/1.1^5

PV = $1600/1.61051

PV = $993.47