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3 years ago

if interest rates are positive, the future value of a given sum will always be less than the present value

Business

1 answer:

Alexeev081 [22]3 years ago

5 0

Answer:

False. If interest rates are positive, the future value will always be more than the present value.

Explanation:

Future value is given by:

FV = PV $(1 + i)^{n}$

wherein, FV= Future Value

PV= Present Value

i = rate of interest per period

n = number of periods

So, if interest rates are positive, the current investment shall be compounded to arrive at Future value which would turn out to be more than the present value.

For example, $ 100 invested today at 10% per annum, after an year would yield $110. This represents future value.

In case future value is provided as 110$ and rate of interest is given as 10% per annum, such future value discounted at 10% would give $100 today which represents the present value.

Thus, Future value will always be more than the present value if interest rates are positive.

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True.

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3 years ago

in a recent issue of aarp the magazine, a print ad for state farm insurance annuities advises readers that "the company has help

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1 year ago

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3 years ago

A consumer downloads 4 movies and 3 apps per week. Suppose the price is $4 per movie and $4 per app, and the marginal utility th

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3 years ago

20. Anna reports the following income and loss: Salary$ 135,000 Income from activity A60,000 Loss from activity B( 35,000) Loss

Dmitry [639]

Answer:

Based on this information, Anna has the following suspended losses:

A) Activity B Activity C

$11,667 $18,333

Explanation:

a) Data and Calculations:

Income and Loss:

Salary $ 135,000

Income from activity A 60,000

Loss from activity B ( 35,000)

Loss from activity C ( 55,000)

The loss from activity B and activity C are reduced by the income from activity A in proportion.

Thus, the income from activity A reduces the losses in B and C:

Income from activity A $60,000

Activity B loss of $35,000 is reduced by $60,000 * $35,000/$90,000 = $23,333 to $11,667 ($35,000 - $23,333)

Activity C loss of $55,000 is reduced by $60,000 * $55,000/$90,000 = $36,667 to $18,333 ($55,000 - $36,667)

b) Note that the losses from activities B and C cannot be reduced by the salary income because both activities are passive sources of income and not active like salary.

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3 years ago