natenut2006 natenut2006

06-02-2018
Business

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What is the present value of $500 due in 2 years at a discount rate of 3%.

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mathmate mathmate

06-02-2018

P=present value
F=future value=500
n=number of years=2
i=annual interest rate=3%

We have
F=P(1+i)^n
=>
P=F/(1+i)^n
=500/(1.03^2)
= 471.30 to the nearest cent

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