Question

What is the approximate present value of $1,000 realized 2 years from now if the interest rate is 4%?

A. $924.56
B. $925.93
C. $961.54
D. $1,040.00
E. $1,081.60

Answer 1

PV= $924.56

Step-by-step explanation:

Giving the following information:

Future Value (FV)= $1,000

Number of periods (n)= 2

Interest rate (i)= 4% = 0.04

To calculate the present value (PV), we need to use the following formula:

FV= PV*(1í)^n

Isolating PV:

PV= FV/(1+i)^n

PV= 1,000 / (1.04^2)

PV= $924.56