Asked by Taylor Monroe on May 07, 2024
Verified
Given the market rate of interest,the present value of $10,000 to be received after a period of 5 years
A) will be more than the present value of $10,000 to be received after a period of 4 years.
B) will be less than the present value of $10,000 to be received after a period of 6 years.
C) will be more than the present value of $10,000 to be received after a period of 6 years.
D) will be the same as the present value of $10,000 to be received after a period of 6 years.
E) will be the same as the present value of $10,000 to be received after a period of 4 years.
Present Value
The current worth of a future sum of money or stream of cash flows given a specified rate of return.
Market Rate
The going rate or typical price of goods, services, or interest rates in the open market.
- Calculate and understand the concept of the present value of future money.
Verified Answer
SW
Shay-La WinnsMay 14, 2024
Final Answer :
C
Explanation :
The present value of a sum of money decreases as the time to receive it increases, due to the time value of money. Therefore, the present value of $10,000 to be received after 5 years will be more than the present value of the same amount to be received after 6 years.
Learning Objectives
- Calculate and understand the concept of the present value of future money.