Question

If the present value of $400 paid one year from now is $320, what is the one-year interest rate? (Note: this number is also known as the discount rate.)

Answer 1

0.2

Explanation:

Present Value = $320

Before 1 One Year, Value =$400

Discount = $400-$320= $80

% Discount = (Discount/Amount Before 1 Year)*100

%D = (80/400)*100

.%D = 20% Or 0.2