If the interest rate is r (expressed as a decimal number), the present value today of $1 to be received n years from today equals ____. A)$1 r ⁿ B)$1(1 + r )ⁿ C)$1\(1 + r )ⁿ D)$1\(1 + n )^r

Question

Quizplus · Accepted Answer

The formula for the present value of $1 to be received n years from today is $1/(1+r)^n. Therefore, the correct formula is $1/(1+r)^n, which can be simplified as $1/(1+r)^n = $1/(1+r)^n x 1 = $1/((1+r)^n x 1)= $1/(1+r)^n. Choice C is the only option that has this formula. The other choices have the correct components, but they are not arranged in the correct order.

If the Interest Rate Is R (Expressed as a Decimal \(1 + R ) N D)$1\(1 + N )

If the Interest Rate Is R (Expressed as a Decimal \(1 + R )^N
D)$1\(1 + N )