Homework SourseWhat present amount is equivalent to 100 received at the end
What present amount is equivalent to $100 received at the end of 5 years, given an interest rate of 16%?
$47.60
$327.40
$40.20
$163.60
$32.30
| a. | $47.60 | |
| b. | $327.40 | |
| c. | $40.20 | |
| d. | $163.60 | |
| e. | $32.30 |
Solution
We know that present value of any amount received in future t years from now is equal to Future amount/(1+Rate of interest)^t=100/(1+16%)^5=47.60
Alternatively, using financial calculator
FV=100
I/Y=16%
N=5
PMT=0
CPT PV=47.60
