You Receive $500 Today Which You Plan to Save for Two

question 474

Multiple Choice

You receive $500 today which you plan to save for two years. Also, in two years you will be given another $500. If the interest rate is 5 percent, what is the present value of the payment of $500 today and the $500 in two years?

• A) $5001.05)2 + $500/1.05)2
• B) $5001.05)2 + $500
• C) $500 + $500/1.05)2
• D) $500 + $500

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