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If I will receive $500,000 at the end of five years with an annual interest rate of 8% compounded quarterly, the present value of this payment is calculated as:_______________.

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thaovtp1407

Answer:

PV= $336,485

Explanation:

Given:

FV = $500,000

n = 5 years = 20 quarters

Interest rate of 8% compounded quarterly = 2%

We have a formula:

  • FV = PV [tex](1+ r)^{n}[/tex]

<=> PV = FV /[tex](1+ r)^{n}[/tex]

<=> PV = 500,000 / [tex](1+ 0.02)^{20}[/tex]

<=> PV= $336,485

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