Question

if the interest rate is 5%, receiving $100 in 2 years is equivalent to receiving what amount today

Answer 1

Answer: $90.70

If the interest rate is 5%, receiving $100 in 2 years is equivalent to receiving $90.70 today.

Calculation:

Here we need to calculate the present value of the amount, if the interest rate is 5%, receiving $100 in 2 years.

Here,

Interest rate, i = 5%

Future Value (FV) = 100

Number of years (n) = 2 years

So to find the present Value using the below formula or using MS Excel

If using MS Excel, =PV(5%,2,,100)

or using below formula:

Present Value = FV x (1+i)^-n

Present Value = 100 x (1+5%)^-2

= 100 x (0.907029)

= 90.702

If the interest rate is 5%, receiving $100 in 2 years is equivalent to receiving $90.70 today.