You believe that a certain asset, such as a business or shop, is going to be worth $100 million in ﬁve
years. If the interest rate is 5 percent, then that asset will be worth $75 million today.

Question

Quizplus · Accepted Answer

If an asset is expected to be worth $100 million in five years and the interest rate is 5 percent, its present value would be less than $75 million due to the time value of money. The present value calculation would be: PV = FV / (1 + r)^n => PV = $100M / (1 + 0.05)^5 => PV = $78.35M. Therefore, the statement is false.

You Believe That a Certain Asset, Such as a Business