What Is the Value in Year 7 of a $700

question 92

Multiple Choice

What is the value in year 7 of a $700 cash flow made in year 3 when the interest rates are 10 percent?

• A) $478.11
• B) $980.00
• C) $1,024.87
• D) $1,364.10

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Definitions:

Rate of Interest

The interest rate a borrower is charged for loaned money from a lender.

Present Value

The monetary value in present terms of a sum of money to be received later or a flow of cash, using a defined return rate.

Compounding

Compounding is the process in which an asset's earnings, from either capital gains or interest, are reinvested to generate additional earnings over time.