If the present value of $220 one year from now is $200, then the interest rate is
A) 4 percent.
B) 6 percent.
C) 8 percent.
D) 10 percent.

Question

Quizplus · Accepted Answer

The interest rate can be found using the formula for present value: $PV = \frac{FV}{(1 + r)^n}$, where PV is the present value, FV is the future value, r is the interest rate, and n is the number of periods. Plugging in the given values: $200 = \frac{$220}{(1 + r)^1}$. Solving for r gives r = 0.10 or 10%.

If the Present Value of $220 One Year from Now