Braden Says That $400 Saved for One Year at 4

question 94

Multiple Choice

Braden says that $400 saved for one year at 4 percent interest has a smaller future value than $400 saved for two years at 2 percent interest.Lefty says that the present value of $400 to be received one year from today if the interest rate is 4 percent exceeds the present value of $400 to be received two years from today if the interest rate is 2 percent.

• A)Braden and Lefty are both correct.
• B)Braden and Lefty are both incorrect.
• C)Only Braden is correct.
• D)Only Lefty is correct.

Apply the concepts of discounting and compounding to determine the value of cash flows at different points in time.

Understand and use financial tables and formulas to find present and future values.

Calculate the effective interest rate required to achieve a financial goal.

Understand the conditions required for a cash flow series to be considered an annuity.

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