what is the present value of $1,000 paid at the end of the next 100 years if the interest rate is 7% per year?
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To calculate the present value of a future payment, we need to discount it back to its value in today's terms. The present value formula is:
Present Value = Future Payment / (1 + Interest Rate)^Number of Years
In this case, the future payment is $1,000, the interest rate is 7% (or 0.07 as a decimal), and the number of years is 100.
Using the formula:
Present Value = $1,000 / (1 + 0.07)^100
To solve this equation, we can use a calculator or a spreadsheet software like Microsoft Excel. Evaluating this equation gives us:
Present Value = $16.67
So, the present value of $1,000 paid at the end of the next 100 years, with an interest rate of 7%, is approximately $16.67.