You have been awarded a Pinder Foundation scholarship to help cover your living costs while studying at the University of Melbourne. The scholarship offers a regular payment of $1,000 per month for three years with the first payment occurring in one and a half months’ time. If the relevant discount rate is 9% p.a. compounding monthly, the present value of the scholarship today is closest to: Group of answer choices A. $32,789 B. $31,446 C. $31,330 D. Need more information to answer the question E. $42,474

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Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.