Use This Information to Answer the Following Question What Amount Must Be Deposited Today to Grow to $450

question 118

Multiple Choice

Use this information to answer the following question. $\begin{array}{|c|c|c|}\hline\text { Periods } & \text { Present Value of } \$ 1 \text { at } 7 \text { Percent } & \text { Present Value of Ordinary Annuity of } \\&&\$ 1 \text { at } 7 \text { Percent }\\\hline 1 & 0.935 & 0.935 \\\hline 2 & 0.873 & 1.808 \\\hline 3 & 0.816 & 2.624 \\\hline\end{array}$
What amount must be deposited today to grow to $450 in three years?

• A) $331.00
• B) $367.20
• C) $171.49
• D) $420.75

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Definitions:

Yield Curve

A curve representing the yields of bonds with the same creditworthiness but varying expiration dates, measured at a specific moment.

Term Structure

The relationship between the interest rates or yields of bonds and their respective maturities.

Federal Government Bonds

Securities issued by a national government's treasury, often considered low-risk investments.

Risk Premium

The additional return expected by an investor for taking on a higher level of risk.