To Determine the Amount to Be Deposited in a Bank

question 11

Multiple Choice

To determine the amount to be deposited in a bank today to grow to $5,000 three years from now at 7%,which table should be used?

• A)Present value of 1.
• B)Future value of 1.
• C)Present value of an annuity.
• D)No table is required;just multiply $5,000 by 1.07.

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Definitions:

Face Value

The nominal or dollar value printed on a security, such as a bond or stock, representing its official worth at issuance.

Nominal Discount Rate

The discount rate that has not been adjusted for inflation, representing the percentage reduction in present value compared to future value.

Inflation Rate

The percentage increase in the general level of prices for goods and services over a period, typically measured on an annual basis.

Real Dollars

Real dollars refer to the value of money after accounting for inflation, indicating the actual purchasing power of money.