At which interest rate is the present value of $168.54 two years from today equal to $150 today?
A)4 percent
B)5 percent
C)6 percent
D)None of the above would give a present value within a cent of $162.24.

Question

Quizplus · Accepted Answer

We can use the formula for present value of a future amount:

PV = FV/(1 + r)^n

where PV is the present value, FV is the future value, r is the interest rate, and n is the number of periods.

Substituting the given values, we get:

150 = 168.54/(1 + r)^2

Solving for r, we get:

r = 6%

Therefore, the answer is (C) 6 percent.

At Which Interest Rate Is the Present Value of $168