What is the present value of $500.00 to be paid in two years if the interest rate is 5 percent?

a. $476.25

b. $500.00

c. $550.00

d. $453.51?

The present value by definition is:

VP = VF / (1 + i) ^ n

Where,

VF = Future value

I = interest

n = Number of years

Substituting the values:

VP = (500) / (1 + (0.05)) ^ (2)

VP = 453.51

answer:

the present value of $ 500.00 to be paid in two years if the interest rate is 5 percent is

d. $ 453.51