The solution to this problem requires time value of money calculations.Reference to Tables 9-1 through 9-4 in the text is necessary to complete the calculations.
If you must calculate the present value of an amount at 8% compounded quarterly for 2 years, then the interest factor used in the calculation is
A)8% for two periods
B)2% for eight periods
C)the interest factor for 8% for two periods divided by 4
D)twice that for one period at 8% multiplied by 2

Question

Quizplus · Accepted Answer

Since the interest is compounded quarterly, the annual interest rate of 8% is divided by 4 to get 2% per quarter. Over 2 years, there are 8 quarters, so the interest factor is for 2% over 8 periods.

The Solution to This Problem Requires Time Value of Money