The present value formula is used to
A) Determine the current price of an asset when the cash flows and discount rate are known
B) Determine the amount of regular fixed payments on a loan when the interest rate and loan amount are known
C) Determine the yield to maturity on a financial instrument when the current price and cash flows are known
D) All of the above

Question

Quizplus · Accepted Answer

The present value formula is a fundamental financial principle used for various purposes, including determining the current price of an asset given its future cash flows and discount rate (A), calculating the fixed payments on a loan given the interest rate and loan amount (B), and finding the yield to maturity on a financial instrument when its current price and future cash flows are known (C).

The Present Value Formula Is Used to