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22 April, 10:03

You are promised that when you retire from your current job, in 40 years' time, you will receive a gold watch valued at $1 000. If you can invest money at 5% annual interest, what is the present worth of this promise?

Select one:

a. $142

b. $167

c. $211

d. $156

e. $231

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Answers (1)
  1. 22 April, 10:05
    0
    Present Value = $142

    Explanation:

    Giving the following information:

    In 40 years, you will receive a gold watch valued at $1,000. The interest rate is 5%.

    We have to calculate the value today of $1,000. To do this, we need to use the following formula:

    PV = FV / (1+i) ^n

    PV = 1,000 / (1.05) ^40

    PV = $142
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