At Which Interest Rate Is the Present Value of $196

question 209

Multiple Choice

At which interest rate is the present value of $196.85 three years from today equal to $175 today?

• A)2 percent
• B)4 percent
• C)6 percent
• D)8 percent

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Definitions:

Employer's Contribution

The amounts paid by an employer towards employee benefits, such as pension plans, health insurance, and social security.

Distributions to Retirees

Payments made from a pension, retirement plan, or profit-sharing plan to retired employees or beneficiaries.

Marginal Tax Rates

The percentage of tax applied to an individual's or entity’s income for every additional dollar earned, indicating the rate at which the next dollar of taxable income will be taxed.

Short-term Pension Risk Ratio

A measure assessing the risk associated with a pension plan's ability to meet its short-term obligations.