Question

1. Wylie has been offered the choice of receiving $5,000 today or an agreed-upon amount in 1 year. While negotiating the future amount, Wylie notes that he would be willing to take no less than $5,700 if he has to wait a year. What is his TVOM in percent?

Answer 1

Answer:

14%

Explanation:

The computation of the tvom in percentage form is shown below:

Today price × (1 + interest rate) = Future value

$5,000 × (1 + interest rate) = $5,700

(1 + interest rate) = $5,700 ÷ 5,000

(1 + interest rate) = 1.14

So, the interest rate

= 1.14 -1

= 0.14 or 14%

Hence, the interest rate or TVOM i.e times value of money is 14%