John Says That the Future Value of $250 Saved for One

question 48

Multiple Choice

John says that the future value of $250 saved for one year at 6 percent interest is less than the future value of $250 saved for two years at 3 percent interest. George says that the present value of a $250 payment to be received in one year when the interest rate is 6 percent is less than the value of a $250 payment to be received in two years when the interest rate is 3 percent.

• A)John and George are both correct.
• B)John and George are both incorrect.
• C)Only John is correct.
• D)Only George is correct.

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Definitions:

Machine-Hours

A measure of production time, reflecting the total hours that machinery is operational during a specific period.

Multiple Overhead Rate

The use of more than one overhead rate to allocate a company's indirect costs more accurately than a single overhead rate.

Plantwide Overhead Rate

A single overhead absorption rate used throughout an entire plant or factory, applied uniformly to all cost objects.

Labor-Intensive

Describes a process or industry that requires a high input of labor compared to capital.