You are the program manager for your organization. Management would like to consider the present value for your program. If your program is predicted to be worth $450,000 in two years what is the present value of the program if the interest rate is six percent?
To calculate the present value of the program, we use the formula for present value (PV) which is PV = FV / (1 + r)^n, where FV is the future value, r is the interest rate, and n is the number of periods. Here, FV is $450,000, r is 6% or 0.06, and n is 2 years. Plugging in the values, we get PV = 450,000 / (1 + 0.06)^2 = 450,000 / (1.06)^2 ≈ 450,000 / 1.1236 ≈ 400,498. Hence, the present value of the program is approximately $400,498.
=450000 (1/(1+0.06)^2) = 400,498 (The answer is A)
Syed, Did you take up this exam ? where these set of questions helpful to clear ?
A is right answer.