Which,if Any,of the Present Values Below Are Correctly Computed

question 155

Multiple Choice

Which,if any,of the present values below are correctly computed?

• A)A payment of $1,000 to be received one year from today,with a 8 percent interest rate,has a present value of $945.45.
• B)A payment of $1,000 to be received one year from today,with a 9 percent interest rate,has a present value of $911.11.
• C)A payment of $1,000 to be received one year from today,with a 10 percent interest rate,has a present value of $905.06.
• D)None of the above are correct to the nearest cent.

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Definitions:

Business Entity Assumption

A concept of accounting that limits the economic data in the accounting system to data related directly to the activities of the business.

Economic Transactions

Acts of buying, selling, or trading goods, services, or financial assets in the economy.

Cost Principle

An accounting principle that states all goods and services purchased by a business must be recorded at their historical cost, not their current value.

Monetary Unit

A standard unit of value in which economic transactions are recorded and the primary currency used within an economy.