Find the present value of $750 to be paid four years from now when the prevailing interest rate is 10 percent, if interest is compounded annually.

Find the present value of $750 to be paid four years from now when the prevailing interest rate is 10 percent, if interest is compounded annually.

 

answer:
FV = $750
i = .1 or 10%
t = 4 years.

PV = FV / (1 + i)^t; PV is present value, FV is future value, i is interest rate, and t is time periods.

Substituting values;

PV = 750 / (1.1)^4 = $512.26

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