If You Must Calculate the Present Value of an Amount

question 66

Multiple Choice

If you must calculate the present value of an amount at 12% compounded quarterly for two years,then the interest factor used in the calculation is

• A)3% for eight periods.
• B)12% for eight periods.
• C)the interest factor for 12% for two periods divided by 4.
• D)None of these are correct

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Definitions:

Present Value

Present Value is a financial concept that represents the current worth of an amount that is to be received in the future, discounted to reflect the time value of money and interest rates.

Accurate To The Cent

Describes a level of precision in financial calculations or measurements that are exact to the smallest denomination of currency, such as a cent in the U.S. dollar.

Periodic Interest Rate

The rate of interest charged on a loan or earned by an investment for a duration that is less than one year.

Annuity

An economic scheme that delivers a constant payment stream to a recipient, predominantly utilized in preparing for retirement.