If the interest rate is 5 percent,$100 received at the end of seven years is worth how much today? A) 100/(0.05)⁷ B) 100/(1 + 0.05)⁷ C) 100/(1 + 5)⁷ D) 100

Question

Quizplus · Accepted Answer

To find the present value, we need to discount the future value using the present value factor, which is calculated as (1 + interest rate) raised to the negative number of years. Therefore, the present value of $100 received at the end of seven years at an interest rate of 5 percent is calculated as: $100 / (1 + 0.05)^7 = $71.39. The only choice that represents this calculation is option B.

If the Interest Rate Is 5 Percent,$100 Received at the End