If the annual interest rate remains unchanged over the next two years, and the present value of $120 to be received one year from now is $100, what will $100 be worth two years from now?

Question

Quizplus · Accepted Answer

If the present value of $120 to be received one year from now is $100, it means the interest rate is 20%. Therefore, $100 will be worth $120 after one year. 
Since the interest rate is assumed to remain the same over the next two years, the value of $120 after the first year will be worth $144 after the second year (20% of $120 is $24, so $120 + $24 = $144).

If the Annual Interest Rate Remains Unchanged Over the Next