The Solution to This Problem Requires Time Value of Money

question 155

Multiple Choice

The solution to this problem requires time value of money calculations.Reference to Tables 9-1 through 9-4 in the text is necessary to complete the calculations. If the interest factor used to calculate the future value of $1 at 6% for 5 periods is 1.338,then the present value of $1 at 6% for 5 periods is

• A)1.338 ´ 1.338.
• B)1/1.338.
• C)1/(1.338 x 1.338).
• D)0.338.

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Definitions:

Exemption Clauses

Provisions in a contract that limit or exclude one party’s liability under certain circumstances.

Frustrated Contracts Act

Legislation that addresses situations where a contract, through no fault of the parties involved, cannot be fulfilled.

Deposit

Money prepaid with the provision that the funds are to be forfeited in the event of a breach of contract.

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A condition in a contract that, when occurring, can terminate the contract or alter its terms.