What is the maximum that you would be willing to loan your brother for a $100 IOU if he promises to pay you back at the end of the year? You want to earn an annual rate of return of 12%.
A)$82.00
B)$89.29
C)$92.73
D)$88.00

Question

Quizplus · Accepted Answer

To achieve a 12% annual rate of return on a $100 IOU, you would use the formula for calculating the present value: Present Value = Future Value / (1 + rate of return)^n, where n is the number of years. Plugging in the numbers: $100 / (1 + 0.12)^1 = $89.29.

What Is the Maximum That You Would Be Willing to Loan