Suppose you have two bank accounts, one called Account A and another Account B. Account A will be worth $6,500.00 in one year. Account B will be worth $12,600.00 in two years. Both accounts earn 6% interest. What is the present value of each of these accounts?

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  1. Account A:
    P = Po + Po*r*t = $6500.
    Po + Po*0.06*1 = 6500.
    Po + 0.06Po = 6500.
    1.06Po = 6500.
    Po = $6,132.08 = Present value.

    Account B:
    Same procedure as A.

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