Alex says that $400 saved for one year at 4 percent interest has a smaller future value than $400 saved for two years at 2 percent interest.Brian says that the present value of $400 one year from today if the interest rate is 4 percent is more than the present value of $400 two years from today if the interest rate is 2 percent.
A)Alex and Brian are both correct.
B)Alex and Brian are both incorrect.
C)Only Alex is correct.
D)Only Brian is correct.

Question

Quizplus · Accepted Answer

Alex is correct because the future value of $400 saved for one year at 4 percent interest is $416, while the future value of $400 saved for two years at 2 percent interest is $408. Brian is also correct because the present value of $400 one year from today if the interest rate is 4 percent is $384.62, while the present value of $400 two years from today if the interest rate is 2 percent is $392.16.

Alex Says That $400 Saved for One Year at 4