What Is the Present Value of a $500 Deposit in Year

question 44

Multiple Choice

What is the present value of a $500 deposit in year 1, and another $100 deposit at the end of year 4 if interest rates are 5 percent?

• A) $480.00
• B) $493.62
• C) $558.46
• D) $582.27

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Definitions:

Bond Premium

The amount by which the selling price of a bond exceeds its face value, typically resulting from interest rates lower than the bond's coupon rate.

Interest Payment

The payment made to creditors or bondholders as compensation for the use of borrowed money, typically calculated as a percentage of the principal.

Journal Entry

A record of a financial transaction in an accounting system, noting the accounts and amounts debited and credited.

Interest Expense

The cost incurred by an entity for borrowed funds, often expressed as an annual percentage of the principal.