If the Rate of Interest (R) Is 8%, Then You

question 2

Multiple Choice

If the rate of interest (r) is 8%, then you should be indifferent about receiving $500.00 today or ________.

• A) $462.96 in one year
• B) $500.00 in one year
• C) $540.00 in one year
• D) None of the above

---

Definitions:

Promissory Note Payable

A financial instrument that signifies a written promise by one party to pay a specific sum of money to another party under agreed terms.

360-Day Year

A simplified method of calculating interest for commercial loans or bonds that assumes each month has 30 days, resulting in a 360-day year.

Interest

The cost of borrowing money or the return on investment, typically expressed as a percentage over a period of time.

Principal

The original sum of money borrowed in a loan, or the amount of the investment on which interest is calculated.