What is the present value (PV) of $70,000 received six years from now, assuming the interest rate is 5% per year?

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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What is the present value (PV) of $70,000 received six years from now, assuming the interest rate is 5% per year?
O A. $45,500
O B. $52,235
OC. $91,411
D. $44,400
Transcribed Image Text:What is the present value (PV) of $70,000 received six years from now, assuming the interest rate is 5% per year? O A. $45,500 O B. $52,235 OC. $91,411 D. $44,400
Expert Solution
Step 1

PV = FV / (1 + r / n)nt

Where,

  • PV = Present value
  • FV = Future value
  • r = Rate of interest (percentage ÷ 100)
  • n = Number of times the amount is compounding
  • t = Time in years
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