A Present value question from Techfaq360:

What is the present value if the organization expects to make $500,000 three years from now and the annual interest rate is 4 percent?

1.  $4000

2.  $5000

3.  $25000

4.  $4500

Correct Answer is : 1

A is the correct answer.
Present Value = FV/(1+R)n. FV is the future value, R is the interest rate, and n is the number of time periods. 500000/(5*5*5) = 4000.

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