If 'S' is the amount available after 'n' interest periods for an initial principal 'P' with the discrete compound interest rate 'i', the present worth is given by__________________?
Correct answer: B. S/(1 + i)n
- A. (1 + i)n/S
- B. S/(1 + i)n
- C. S/(1 + in)
- D. S/(1 + n)i
Explanation
Compounding gives S = P(1 + i)^n, so rearranging for the present worth gives P = S/(1 + i)^n. The exponent n must apply to the complete compounding factor.
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