What is the present value of a payment of $100 to be made one year from today?
A)$100*(1 + r)
B)$100/(1 + r)
C)$100 - $100 r
D)$100 - (1 + r)/$100

Question

What is the present value of a payment of $100 to be made one year from today?
A)$100*(1 + r) 
B)$100/(1 + r) 
C)$100 - $100 r 
D)$100 - (1 + r)/$100

Quizplus · Accepted Answer

The present value formula is PV = FV/(1+r), where PV is the present value, FV is the future value, and r is the discount rate. In this case, FV is $100, and r is not given, so we cannot calculate the exact present value. However, we do know that the present value will be less than $100 because we are discounting it back one year. Therefore, the only possible answer is B, which is the only choice that gives a present value smaller than $100 by dividing it by (1+r).

What Is the Present Value of a Payment of $100