To find the present value of $100 that you will receive next year at an interest rate of 6 percent, we can use the present value formula:
Present Value (PV) = Future Value (FV) / (1 + r)^n
Where:
- PV = Present Value
- FV = Future Value ($100 in this case)
- r = interest rate (6% or 0.06)
- n = number of years (1 year in this case)
Now, plug in the values:
PV = $100 / (1 + 0.06)^1
PV = $100 / 1.06
PV ≈ $94.34
So, approximately, the present value of $100 received next year at an interest rate of 6 percent is around $94.34. This means that if you wanted to have $100 next year, you would need to invest about $94.34 today at the given interest rate.