Question

If the interest rate is 5 percent, $100 received at the end of seven years is worth how much today

Answer 1

Let x = the worth of the investment today (the principal).

Value after 7 years is A = $100
Duration, t = 7 years
Interest rate, r = 5%
Compounding interval, n = 12 (monthly)

Therefore

`A = x(1+ (r)/(n) )^(nt)`
That is,
x(1 + 0.05/12)⁸⁴ = 100
1.418x = 100
x = 70.52

Answer: $70.52