Which of the following has a present value of $100?
A)$110 in two years when the interest rate is 5 percent
B)$112.36 in two years when the interest rate is 6 percent
C)$117.49 in two years when the interest rate is 7 percent
D)None of the above are correct to the nearest penny.

Question

Quizplus · Accepted Answer

We can use the present value formula to determine which option is worth $100 today. The formula is: Present Value = Future Value / (1 + r)^n, where r is the interest rate and n is the number of periods. Plugging in the values for each option, we get:

A) Present Value = 110 / (1 + 0.05)^2 = $100.00 (rounded to the nearest penny)
B) Present Value = 112.36 / (1 + 0.06)^2 = $100.00 (rounded to the nearest penny)
C) Present Value = 117.49 / (1 + 0.07)^2 = $100.00 (rounded to the nearest penny)

So, option B is the best choice because it has a future value of $112.36 in two years but is worth $100 today.

Which of the Following Has a Present Value of $100