# Present Value Question:

Submitted by pmptesttaker on Thu, 03/11/2010 - 19:43

**What is the present value if the organization expects to make $500,000 three years from now and the annual interest rate is 4 percent?
**1.$4000

2.$5000

3.$25000

4.$4500

Correct Answers are : 1

Where is the $4000 coming from?

Forums:

pkukilla

Thu, 03/11/2010 - 20:13

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## pv= 444498.17

PV (1+r)^n = FV

PV=> FV(1+r)^n

PV = 500000/(1.04*1.04*1.04)

= 444498.17

I have seen this question in one of the site with 200 questions and choices were obviously wrong

ChandraR

Thu, 03/11/2010 - 20:32

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## Those guys messed up by

Those guys messed up by making a fundamental blunder. For 1+r, they took it as 1+4 = 5 and calculated as 500000/(1+4)^3 instead of 500000/(1+0.04)^3.

Chandra

pmptesttaker

Thu, 03/11/2010 - 20:35

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## Present Value

Thanks for the answer....I keep on confusing these formulas:

PV = F V .

ChandraR

Thu, 03/11/2010 - 20:40

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## Remember simple interest

Remember simple interest and compound interest calculations! FV is nothing but compound interest calculation

Chandra

admin

Sat, 03/13/2010 - 14:14

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## Chandra - Good response.

Chandra - Good response. Liked the way you pointed out the mistake :)