To find the present value (PV) of $100 that will be received next year at an interest rate of 6 percent, you can use the present value formula:
PV = FV / (1 + r)
where:
- PV = Present Value
- FV = Future Value ($100)
- r = interest rate (6 percent or 0.06)
Substituting the values in:
PV = 100 / (1 + 0.06) = 100 / 1.06 ≈ 94.34
So, the present value of $100 to be received next year, with an interest rate of 6 percent, is approximately $94.34.
This means that if you were to invest approximately $94.34 today at a 6 percent interest rate, it would grow to $100 in one year.