The solution to this problem requires time value of money calculations.Reference to Tables 9-1 through 9-4 in the text is necessary to complete the calculations.
If the interest factor used to calculate the future value of $1 at 6% for 5 periods is 1.338, then the present value of $1 at 6% for 5 periods is
A)1.338 × 1.338.
B)1/1.338.
C)1/1.338 × 1.338).
D)0.338.

Question

Quizplus · Accepted Answer

The present value of $1 at 6% for 5 periods is the reciprocal of the future value factor, which is 1/1.338 = 0.7479 or approximately 0.748. Therefore, the correct choice is B.

The Solution to This Problem Requires Time Value of Money