If the Interest Rate Is 10 Percent, What Is the Present

question 95

Multiple Choice

If the interest rate is 10 percent, what is the present value of $25,000 received two years from now?

• A) $20,000
• B) $20,661
• C) $30,250
• D) $30,000

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Definitions:

Supply of Money

The total value of money available in an economy at a specific time, including cash, coins, and balances in bank accounts.

Tight Monetary Policy

A monetary policy strategy used by central banks to decrease the money supply and increase interest rates to control inflation and stabilize the currency.

Net Exports

The value of a country's total exports minus the value of its total imports. It is a component of a country’s GDP.

Federal Reserve System

The main banking authority in the United States, tasked with setting monetary policy, overseeing banks, ensuring the financial system's stability, and offering financial services.