What rate of return results in a present value of $432 for $250 received one year from now and another $250 received two years from now?
A)9.89%
B)10.32%
C)10.94%
D)11.37%

Question

Quizplus · Accepted Answer

The present value formula is:
PV = FV / (1 + r)^n
where PV is the present value, FV is the future value, r is the rate of return, and n is the number of periods.

Using this formula, we can set up two equations:
432 = 250 / (1 + r) + 250 / (1 + r)^2
Simplifying and solving for r, we get:
r ≈ 0.1032 or 10.32%

Therefore, the best choice is B, with a rate of return of 10.32%.

What Rate of Return Results in a Present Value of $432