Question

What amount of cash must be invested today in order to have $38,000 at the end of one year assuming the rate of return is 8%? Use Appendix Table 1.

Multiple Choice

• $30,400

• $32,579

• $35,185

• $34,960

Answer 1

present value = future value * (1 / (1+i) ^ n) where ; i = rate of interest

   n= number of years

therefore present value = $ 38000* (1/1+8%)^1

= $38000* 0.9259

= $35185

therefore option (c)