Question

34) Which of the following has the highest present value?

Group of answer choices

A) $1,000 received in 3 years if the current interest rate is 4%

B) $1,500 received in 5 years if the current interest rate is 6%

C) $2,000 received in 6 years if the current interest rate is 11%

D) $3,000 received in 10 years if the current interest rate is 12%

Answer 1

the formula is:

FV=future value

PV=present value

i=interest rate

n=years

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A) $1,000 received in 3 years if the current interest rate is 4%

PV=1000*(1+0.04)^-3=888.996359=889

B) $1,500 received in 5 years if the current interest rate is 6%

PV=1500*(1+0.06)^-5 =1120.88726=1121

C) $2,000 received in 6 years if the current interest rate is 11%

PV=2000*(1+0.11)^-6 =1069.28167=1069

D) $3,000 received in 10 years if the current interest rate is 12%

PV=3000*(1+0.12)^-10 =965.91971=966

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Option B has the highest present value.