At Which Interest Rate Is the Present Value of $162

question 239

Multiple Choice

At which interest rate is the present value of $162.24 two years from today equal to $150 today?

• A) 4 percent
• B) 5 percent
• C) 6 percent
• D) None of the above would give a present value within a cent of $162.24.

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Definitions:

Book Income

The income reported by a business for financial accounting purposes, which may differ from taxable income due to different accounting methods.

Taxable Income

The portion of income that is subject to income tax after deductions and exemptions.

AMT Exemption

An amount exempt from the Alternative Minimum Tax, designed to ensure that taxpayers with higher income pay a minimum amount of tax.

Corporation

A legal entity owned by shareholders, with rights and liabilities distinct from those of its owners, and subject to corporate income tax.