A treasury note that will be worth $100,000 in 10 years currently sells for $81,058. What constant interest rate does that correspond to?
A) 2.10%
B) 2.34%
C) 0.02%
D) 4.82%

Question

Quizplus · Accepted Answer

The correct answer is A because the constant interest rate is 2.10%. This can be calculated using the formula:FV = PV * (1 + r)^nwhere:FV is the future valuePV is the present valuer is the interest raten is the number of yearsIn this case, we have:FV = $100,000PV = $81,058n = 10Substituting these values into the formula, we get:$100,000 = $81,058 * (1 + r)^10Dividing both sides by $81,058, we get:(1 + r)^10 = 1.2338Taking the 10th root of both sides, we get:1 + r = 1.0210Subtracting 1 from both sides, we get:r = 0.0210Multiplying by 100, we get:r = 2.10%

A Treasury Note That Will Be Worth $100,000 in 10