What is the present value of $5,000 received 5 years from now if the discount rate is 5% (rounded to the nearest dollar?a. $6,38

Question

3 years ago

5

0.b. $3,918.c. $3,200.d. $3,560.

1 answer:

e-lub [12.9K] · Answer 1 · 2022-04-18T06:59:43+03:00

Answer:

The correct option is b. $3,918.

Explanation:

This can be calculated using the simple present value (PV) formula as follows:

PV = FV / (1 + r)^n ............................ (1)

Where;

PV = Present value of the amount = ?

FV = Future value of the amount = $5,000

r = Discount rate = 5%, or 0.05

n = number of years = 5

Substituting the values into equation (1), we have:

PV = $5,000 / (1 + 0.05)^5

PV = $5,000 / 1.05^5

PV = $5,000 / 1.2762815625

PV = 3,918

Therefore, the correct option is b. $3,918.