What Is the Present Value of a Payment of $1,000

question 248

Multiple Choice

What is the present value of a payment of $1,000 two years from now if the interest rate is 6%?

• A) $2,000/1.06
• B) $1000/1.06)2
• C) $1000/1 + 0.062)
• D) None of the above are correct.

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Definitions:

Swap Contract

An agreement between two parties to exchange sequences of cash flows over a set period of time, generally used to exchange different types of interest rates or currencies.

Specified Cash Flows

Designated or particular cash movements into or out of a business or investment over a defined period.

Payoff Profile

A graphical representation that shows the potential profit or loss of an investment or strategy at various price levels.

Financial Arrangement

A financial arrangement is an agreement between parties regarding the management, transaction, or repayment of money, often detailing terms for loans, payments, or investments.