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3 July, 16:30

What is the present value of $500.00 to be paid in two years if the interest rate is 5 percent?

a. $476.25

b. $500.00

c. $550.00

d. $453.51?

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Answers (1)
  1. 3 July, 20:03
    0
    The present value by definition is:

    VP = VF / (1 + i) ^ n

    Where,

    VF = Future value

    I = interest

    n = Number of years

    Substituting the values:

    VP = (500) / (1 + (0.05)) ^ (2)

    VP = 453.51

    answer:

    the present value of $ 500.00 to be paid in two years if the interest rate is 5 percent is

    d. $ 453.51
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