What is the present value of $500.00 to be paid in two years if the interest rate is 5 percent? A. $453.51 B. $500.00 C. $476.25 D. $550.00 | Homework.Study.com (2024)

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Business Finance Net present value

Question:

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

A. $453.51

B. $500.00

C. $476.25

D. $550.00

Present Value:

When a person expects to receive a certain amount of money in the future, the current worth of that money is the present value. The future cash flow needs to be discounted at a certain interest rate to get the present value.

Answer and Explanation:1

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The present value is A. $453.51.

Since the cash flow occurred one time, we will calculate the present value of the lump sum. The formula is:

{eq}P...

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What is the present value of $500.00 to be paid in two years if the interest rate is 5 percent? A. $453.51 B. $500.00 C. $476.25 D. $550.00 | Homework.Study.com (1)

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How to Calculate Present Value of an Investment: Formula & Examples

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Chapter 24/ Lesson 15

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Calculating the present value of an investment tells how much money needs to be saved now in order to reach a desired, future amount. Explore the definition of and formula for the present value of an investment, and see examples.

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What is the present value of $500.00 to be paid in two years if the interest rate is 5 percent? A. $453.51 B. $500.00 C. $476.25 D. $550.00 | Homework.Study.com (2024)
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