What is the present value of $2,000 to be received in 5 years at an 8% annual discount rate?

What is the present value of $2,000 to be received in 5 years at an 8% annual discount rate?

• A. Approximately $1,420.00
• B. Approximately $1,360.54
• C. Approximately $1,200.00
• D. Approximately $1,500.00

Answer: (B)

The present value reflects how much a future amount is worth today when discounted at a given rate. With annual compounding, PV = FV / (1 + r)^n. Here FV = 2000, r = 0.08, n = 5. Compute (1.08)^5 ≈ 1.469328, then PV ≈ 2000 / 1.469328 ≈ 1360.54. So the present value is about $1,360.54. This matches the option around 1,360.54. Other numbers would require different discounting factors that don’t align with an 8% rate over five years.

The present value reflects how much a future amount is worth today when discounted at a given rate. With annual compounding, PV = FV / (1 + r)^n. Here FV = 2000, r = 0.08, n = 5. Compute (1.08)^5 ≈ 1.469328, then PV ≈ 2000 / 1.469328 ≈ 1360.54. So the present value is about $1,360.54. This matches the option around 1,360.54. Other numbers would require different discounting factors that don’t align with an 8% rate over five years.