A Promised Amount $FV "N" Years into the Future Is

question 101

Multiple Choice

A promised amount $FV "n" years into the future is worth how much today, if the interest rate is "i%" per year?

• A) $FV/(1 + i)ⁿ
• B) ($FV/n) (i%)
• C) (1 + i)ⁿ/$FV
• D) [$FV/(1 + i)]ⁿ

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Definitions:

Inventory Loan

A loan that is secured by the inventory of a business, allowing the company to use its inventory as collateral.

Maturity Factoring

A financing method where a business sells its invoices to a factor at a discount but receives payment only when the customer pays the invoice at maturity.

Factoring

A financial transaction where a business sells its accounts receivable to a third party at a discount to raise immediate capital.