Question

When the interest rate is 10% per year, all of the following are equivalent to $5,000 now except: A) $4,545 one year ago B) $5,500 one year later C) $4,012 two years ago D) $6,050 two years later

Answer 1

Answer:

$4,012 two years ago

Explanation:

Answer 2

Answer:

$4,021 two years ago

Explanation:

Given that

The Rate of interest is 10%

And as we know that

PV = FV × (1 + i)^(-n)

And

FV = PV ÷ (1 + i)^n

where,  

PV = prsent value,

FV = future value ,

i = interest rate,

n = years

Now

a)

FV = $4,545 × (1.1)

= $4,999.5

b)

PV = $5,500 ÷ (1.1^-1)

= $5,000

c)

FV = $4,021 × (1.1^2)

= $4,865.41

d)

PV = $6,050 × (1.1^-2)

= $5,000

hence, the correct option is c. $4,021

It is wrongly written as $4,012