Max says that the present value of $500 to be received one year from today if the interest rate is 8 percent is more than the present value of $500 to be received two years from today if the interest rate is 4 percent.Mitch says that $500 saved for two years at an interest rate of 3 percent has a larger future value than $500 saved for one years at an interest rate of 6 percent.
A) Both Max and Mitch are correct.
B) Only Max is correct.
C) Only Mitch is correct.
D) Neither Max nor Mitch is correct.

Question

Quizplus · Accepted Answer

Max is correct because the present value of $500 received in one year at 8% is higher than the present value of $500 received in two years at 4%. Mitch is also correct because $500 saved for two years at 3% has a larger future value than $500 saved for one year at 6%.

Max Says That the Present Value of $500 to Be