Future Investment Value Calculation for Maria Addai

How much should Maria Addai pay today for an investment that offers a future payment of $750 two years from now, assuming an annual rate of 6.5 percent compounded daily?

Maria Addai should be willing to pay approximately $661.85 for this investment today in order to earn an annual rate of 6.5 percent, compounded daily.

Understanding the Present Value Calculation

To determine the present value of the future payment, we can use the formula for compound interest:

Present Value = Future Value / (1 + interest rate)^n

In this case, the future payment is $750, the interest rate is 6.5 percent (or 0.065 as a decimal), and the time period is two years.

Plugging in these values into the formula:

Present Value = $750 / (1 + 0.065)^2

Calculating the exponent and simplifying:

Present Value = $750 / (1.065)^2

Present Value = $750 / 1.135225

Present Value ≈ $661.85

Therefore, to secure an investment that yields a future payment of $750 two years from now, Maria Addai should be willing to pay an amount close to $661.85 today.

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