Find the present value of 500000 25 years from now if intere

Find the present value of $500,000 25 years from now, if interest is compounded quarterly at 11.9%. The present value is approximately $ (Round to the nearest cent as needed.)

Solution

The formula for the present value is PV = FV / (1+r)ⁿ , where PV is the present value, FV is the future value , r is the rate of interest for the period in decimals and n is the number of periods. Here, FV = $ 500000, r = (11.9/4)* 1/00 = 11.9/400 = 0.02975 and n = 25 *4 = 100. Then, PV = 500000/( 1+ 0.02975)¹⁰⁰ = 500000/(1,02975)¹⁰⁰ = 500000/18.75772061 = $26655.69 ( on rounding off to the nearest cent)