If Inflation Averages 6 Percent Per Year, What Is the Value

question 4

Multiple Choice

If inflation averages 6 percent per year, what is the value of a dollar ten years from now?

• A) 53 cents
• B) 56 cents
• C) 79 cents
• D) $1.79

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Definitions:

Maturity Value

The amount to be paid to the holder of a financial instrument at its maturity date, including principal and any remaining interest.

Interest

The cost of borrowing money, typically expressed as a percentage of the sum borrowed, or the income earned from lending money.

Aging of Receivables

Aging of receivables is an accounting method used to estimate the amount of a company's accounts receivable that may not be collectible, represented in time categories based on the length of time the invoices have been outstanding.

Allowance for Doubtful Accounts

A contra-asset account used to estimate the portion of a company's receivables that may not be collected.