If the Interest Rate Is 4 Percent, the Present Value

question 167

Multiple Choice

If the interest rate is 4 percent, the present value of $10,000 to be received two years from today is about

• A) $9,246.
• B) $9,615.
• C) $10,816.
• D) $10,400.

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Definitions:

Net Interest

The difference between the revenue from interests received on various investments and the expenses from paying interest on borrowings.

Defined Benefit Liability

The present value of the future retirement benefits that an employer has committed to pay to employees, as defined by their pension plan terms.

Projected Benefit Obligation

An estimate of the total amount of benefits, both vested and non-vested, that a company expects to provide to employees in pension plans.

Prior Service Cost

The cost of additional benefits granted to employees in a pension plan amendment, attributed to employee service in prior periods.