$180 is to be paid now. What amount would be equivalent 3 quarters earlier given an interest rate of 6.8% per year?

A) $184.33
B) $212.14
C) $171.27
D) $166.81
E) $191.54

Question

$180 is to be paid now. What amount would be equivalent 3 quarters earlier given an interest rate of 6.8% per year?A)  $184.33B)  $212.14C)  $171.27D)  $166.81E)  $191.54

Zybrea Knight · Accepted Answer

Final Answer : C, Explanation :   To find the equivalent amount 3 quarters earlier, we need to discount the future value ($180) back by the interest rate for the period in question. The formula for discounting is   P V = F V ( 1 + r ) n PV = \frac{FV}{(1 + r)^n} P V = ( 1 + r ) n F V ​  , where PV is the present value, FV is the future value, r is the interest rate per period, and n is the number of periods. Here, the interest rate per quarter is   6.8 % / 4 = 1.7 % 6.8\% / 4 = 1.7\% 6.8%/4 = 1.7%  , or 0.017 as a decimal, and n is 3 quarters. Thus,   P V = 180 ( 1 + 0.017 ) 3 PV = \frac{180}{(1 + 0.017)^3} P V = ( 1 + 0.017 ) 3 180 ​  , which calculates to approximately $171.27.

$180 is to be paid now. What amount would be equivalent 3 quarters earlier given an interest rate of 6.8% per year?

A) $184.33
B) $212.14
C) $171.27
D) $166.81
E) $191.54

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