Present and future value tables of $1 at 11% are presented below.

-Spielberg Inc. signed a $200,000 noninterest-bearing note due in five years from a production company eager to do business. Comparable borrowings have carried an 11% interest rate. What is the value of this debt at its inception?
A) $200,000.
B) $178,000.
C) $118,690.
D) $222,000.

Question

Present and future value tables of $1 at 11% are presented below.

-Spielberg Inc. signed a $200,000 noninterest-bearing note due in five years from a production company eager to do business. Comparable borrowings have carried an 11% interest rate. What is the value of this debt at its inception?
A) $200,000. 
B) $178,000. 
C) $118,690. 
D) $222,000.

Quizplus · Accepted Answer

PV = $200,000 × 0.59345* = $118,690
*PV of $1: n = 5; i = 11%

Present and Future Value Tables of $1 at 11% Are