If the risk-free rate of interest (r_f)is 6%,then you should be indifferent between receiving $250 in one year or A)$235.85 today. B)$250.00 today. C)$265.00 today. D)$244.00 today. E)$256.00 today.

Question

Quizplus · Accepted Answer

To find out the present value of $250 that will make it equivalent to receiving it after one year, we use the formula:

Present Value = Future Value / (1 + r)

where r is the risk-free interest rate. Substituting the values:

Present Value = $250 / (1 + 0.06)
Present Value = $235.85

Therefore, receiving $235.85 today is equivalent to receiving $250 after one year, assuming a risk-free interest rate of 6%. Hence, option A) is the best choice.

If the Risk-Free Rate of Interest (Rf)is 6%,then You Should

If the Risk-Free Rate of Interest (R_f)is 6%,then You Should