If the interest rate at which you can lend funds is r percent per year,then the present value of Y dollars to be received next year is

Question

Quizplus · Accepted Answer

The formula for present value is PV = FV / (1 + r), where PV is present value, FV is future value and r is the interest rate. In this case, we want to find the present value of Y dollars to be received next year, so FV = Y and r is given as r percent per year. To use the formula, we need to convert r percent to a decimal, which is r/100. Putting these values in the formula, we get PV = Y / (1 + r/100). This matches option E, Y / (1 + r).

If the Interest Rate at Which You Can Lend Funds