Consider the following timeline: If the current market rate of interest is 7%, then the value as of year 1 is closest to ________.
A) $0
B) $1000
C) $570
D) $68

Question

Consider the following timeline:  If the current market rate of interest is 7%, then the value as of year 1 is closest to ________.
A) $0 
B) $1000 
C) $570 
D) $68

Quizplus · Accepted Answer

D) Two part problem: FV = PV (1 + r)ⁿ = 500 11ea84dc_f584_e480_9a63_3b4431455413_TB1316_11_TB1316_11 = $535 PV = FV / (1 + r)ⁿ = -500 / 11ea84dc_f584_e481_9a63_ef5ac3192f0e_TB1316_11_TB1316_11 = -$467 So, the answer is $535 + -$467 = $68.

Consider the Following Timeline: If the Current Market Rate