At Which Interest Rate Is the Present Value of $35

question 157

Multiple Choice

At which interest rate is the present value of $35.00 two years from today equal to about $30.00 today?

• A)5 percent
• B)6 percent
• C)7 percent
• D)8 percent

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Definitions:

Semi-Annual Compounding

Interest calculation on a financial instrument twice a year, adding the interest amount to the principal sum each time.

Interest

The charge for borrowing money, typically expressed as an annual percentage of the principal amount.

Quarter

A three-month period on the financial calendar that companies use to report their earnings and performance.

Account

A document detailing all the transactions related to a particular element within the accounting equation.