Certified Financial Planner (CFP) Exam 2026 – 400 Free Practice Questions to Pass the Exam

Question: 1 / 505

John Becker expects to receive $100,000 from a trust fund. If he discounts this amount at 8% compounded semiannually, what is the current value of the fund?

$49,362.81

To determine the current value of the trust fund that John Becker expects to receive in the future, we need to apply the present value formula for a single sum, which accounts for the time value of money. The formula for calculating the present value (PV) is:

\[ PV = \frac{FV}{(1 + r/n)^{nt}} \]

Where:

- \( FV \) is the future value ($100,000 in this case),

- \( r \) is the annual interest rate (8%, or 0.08),

- \( n \) is the number of compounding periods per year (2 for semiannual compounding),

- \( t \) is the number of years until the payment is received.

Assuming that John expects to receive the $100,000 in 5 years, we can substitute these values into the formula. Here’s how the calculation works step by step:

1. Calculate \( r/n \):

- \( r/n = 0.08/2 = 0.04 \)

2. Calculate \( nt \) for 5 years:

- \( nt = 2*5 = 10 \)

3. Now, apply these values to find the present value:

Get further explanation with Examzify DeepDiveBeta

$53,000.00

$50,000.00

$55,000.00

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