Asked by Abraham Fazliddinov on Jun 02, 2024
Verified
The present value of $4,000 deposited today at 8 percent interest is $5,038.85 three years from now.
Present Value
The current worth of a future sum of money or stream of cash flows, given a specified rate of return, crucial in assessing investment opportunities.
Interest
Interest represents the cost of borrowing money, typically expressed as a percentage of the principal, paid by the borrower to the lender for the use of the lender's money.
- Grasp the concept of the present and future value of money, including the principles of compounding and discounting.
Verified Answer
SH
Samantha HernandezJun 09, 2024
Final Answer :
False
Explanation :
The present value refers to the current worth of a future sum of money or stream of cash flows given a specified rate of return. If $4,000 is deposited today at an 8 percent interest rate, the future value after three years would be more than $4,000 due to the accumulation of interest, but the present value of the future sum of $5,038.85 would actually be less than $5,038.85 today if you are discounting it back at an 8 percent rate.
Learning Objectives
- Grasp the concept of the present and future value of money, including the principles of compounding and discounting.
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