Question 1

You have a bond that entitles you to a one-time payment of $10,000 one year from now.The interest rate is 10 percent per year.How much is the bond worth today?

Accepted Answer

Using the present value formula: 
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, we can find the bond's worth today: 
PV = 10,000 / (1 + 0.10)^1 = $9,090.91. Therefore, the best choice is A.

Question 2

At which interest rate is the present value of $183.60 two years from today equal to about $173.06 today?

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Question 3

Which,if any,of the present values below are correctly computed?

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Question 4

Cleo promises to pay Jacques $1,000 two years from today.If the interest rate is 4 percent,then how much is this future payment worth today?

Accepted Answer

The present value of a future payment is calculated using the formula:PV = FV / (1 + r)^nwhere:PV is the present valueFV is the future valuer is the interest raten is the number of yearsIn this case, the future payment is $1,000, the interest rate is 4%, and the number of years is 2. Plugging these values into the formula, we get:PV = 1000 / (1 + 0.04)^2PV = 1000 / 1.0816PV = $924.56Therefore, the present value of the future payment is $924.56.

Question 5

Of the following interest rates,which is the highest one at which the present value of $200 ten years from today is greater than $150?

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Question 6

Suppose the interest rate is 4 percent.Which of the following has the greatest present value?

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Question 7

Assuming the interest rate is 6 percent,which of the following has the greatest present value?

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The answer of Assuming the interest rate is 6 percent,which...

Question 8

Suppose the interest rate is 5 percent.Consider three payment options:
1)$500 today.
2)$520 one year from today.
3)$550 two years from today.
Which of the following is correct?

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Question 9

Which,if any,of the present values below are computed correctly?

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Question 10

Of the following interest rates,which is the highest one at which you would prefer to have $170 ten years from today instead of $100 today?

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Question 11

What is the present value of a payment of $100 to be made one year from today if the interest rate is 6 percent?

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Question 12

What is the present value of a payment of $200 to be made one year from today if the interest rate is 10 percent?

Accepted Answer

The present value of the payment can be calculated using the formula: 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. Plugging in the values, we get PV = $200 / (1 + 0.10)^1 = $181.82. Therefore, the best choice is B.

Question 13

Suppose the interest rate is 8 percent.Consider three payment options.
1)$300 today.
2)$330 one year from today.
3)$360 two years from today.
Which of the following is correct?

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The answer of Suppose the interest rate is 8 percent.Consider...

Question 14

Assuming the interest rate is 5 percent,which of the following has the greatest present value?

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Question 15

At which interest rate is the present value of $35.00 two years from today equal to about $30.00 today?

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Question 16

At which interest rate is the present value of $360 three years from today equal to about $310 today?

Accepted Answer

We can use the present value formula:

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.

We are given that PV = $310, FV = $360, and n = 3. We need to solve for r:

310 = 360 / (1 + r)^3

(1 + r)^3 = 360 / 310

1 + r = (360 / 310)^(1/3)

r = (360 / 310)^(1/3) - 1

Using a calculator, we get:

r ≈ 0.051 or 5.1%

Therefore, the answer is (B).

Question 17

Suppose the interest rate is 7 percent.Consider four payment options:
Option A: $500 today.
Option B: $550 one year from today.
Option C: $575 two years from today.
Option D: $600 three years from today.
-Which of the payments has the lowest present value today?

Accepted Answer

The present value of each option is calculated using the formula PV = FV / (1 + r)^n. Option D has the lowest present value when discounted at 7% over three years.

Question 18

Suppose the interest rate is 8 percent.Consider three payment options:
1)$200 today.
2)$220 one year from today.
3)$240 two years from today.
Which of the following is correct?

Accepted Answer

To determine the present value of each option, we need to use the formula: PV = FV / (1 + r)^n, where r is the interest rate and n is the number of years until the payment is received. Using the given interest rate of 8 percent, we can calculate the present value of each option as follows:

Option 1: PV = 200 / (1 + 0.08)^0 = $200 
Option 2: PV = 220 / (1 + 0.08)^1 = $203.70 
Option 3: PV = 240 / (1 + 0.08)^2 = $207.85

Therefore, Option 3 has the highest present value and Option 1 has the lowest. It's worth noting that Option 2 has a higher future value ($220) than Option 1 ($200), but it's received one year later, so its present value is lower.

Question 19

If the interest rate is 4.5 percent,what is the present value of a payment of $500 to be made one year from today?

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Question 20

Suppose the interest rate is 7 percent.Consider four payment options:
Option A: $500 today.
Option B: $550 one year from today.
Option C: $575 two years from today.
Option D: $600 three years from today.
-Which of the payments has the highest present value today?

Accepted Answer

The answer of Suppose the interest rate is 7 percent.Consider...

Quiz 14: The Basic Tools of Finance: Present Value Measuring the Time Value of Money