At Which Interest Rate Is the Present Value of $196

question 209

Multiple Choice

At which interest rate is the present value of $196.85 three years from today equal to $175 today?

• A)2 percent
• B)4 percent
• C)6 percent
• D)8 percent

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Definitions:

Risk

The potential for loss or unfavorable outcomes in any given situation, often assessed in finance as the variability of returns on investments.

Return

Return refers to the gain or loss on an investment over a specific period, including income received and the change in value, usually expressed as a percentage of the investment’s initial cost.

Investment Horizon

Time horizon for purposes of investment decisions.

Liquidated

Converted assets into cash or paid off a debt, often referring to the process of closing a business and distributing its assets to claimants.