About How Much Is the Present Value of $1 That

question 16

Multiple Choice

About how much is the present value of $1 that will be paid to you in 3 years if the interest rate were 5%?

• A)$1.14
• B)$1.05
• C)$1.00
• D)$.95
• E)$.86

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Definitions:

Bonds

A fixed income investment in which an investor loans money to an entity (corporate or sovereign) which borrows the funds for a definite period at a variable or fixed interest rate.

Excess Cash

Surplus funds that are not required for immediate operational needs or investment purposes.

Accrued Interest

Interest that has been incurred but not yet paid, usually recorded as a liability on the balance sheet.

Interest Dates

Specific dates on which interest payments on loans or bonds are due to be paid to lenders or bondholders.