PHFO Quantitative Analysis For Business Pre-Assessment Practice Exam

What is the present value of 5,000 to be received in 3 years discounted at 10% annually?

Approximately 4,200 Approximately 4,500 Approximately 3,756 Approximately 2,800

Correct Answer:

Approximately 3,756

Explanation:

Present value shows how much a future amount is worth today when you discount it at a given rate. Use PV = FV / (1 + i)^t. Here, FV is 5,000, i is 10% (0.10), and t is 3 years. Compute (1.10)^3 = 1.331, then PV = 5,000 / 1.331 ≈ 3,756.57, so about 3,756. This is the amount you would need today to receive 5,000 three years from now at a 10% annual return. The other numbers would come from using a different rate or a different time horizon, not from 10% over three years.

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