Question

Linda Williams has been offered a future payment of $810 two years from now. If she can earn an annual rate of 8.10 percent, compounded daily, on her investment, what should she pay for this investment today? (If you solve this problem with algebra round intermediate calculations to 5 decimal places, in all cases round your final answer to the nearest penny.)

Answer 1

We use the formula:  
A=P(1+r/365)^365n
where   
A=future value
P=present value  
r=rate of interest
n=time period.

810=P*(1+0.081/365)^(365*2)

P=810/(1+0.081/365)^(365*2)

=810*0.85046

=$688.87(Approx)