Question

An investment paid to you in one year in the amount of $100 will be worth how much today

use FV = PV (1+ i)^N and the answer is 85
use PV = FV/(1+r) and the answer is about 90.91
use FV = PV(1 + i)^N and the answer is 90
use PV =FV(1+r) and the answer is about 109.91

Answer 1

The second choice is the right answer. We are given the future value (FV = $100), and we want to solve for PV. Finally, assuming that the interest rate is positive, and since this is only for 1 year, the future value must be higher than the present value (FV > PV). Since the fourth choice has FV < PV = 109.91, it does not fit. The second choice has FV > PV = 90.91, so it is the only logical choice.