Final answer:
The correct table to use to determine the amount deposited three years ago that would be worth $1,000 today is the 'present value of 1' table, which factors in the interest rate and time period to provide the present value of a future sum.
Step-by-step explanation:
To determine what amount was deposited three years ago to provide $1,000 today, you would use the present value of 1 table. This table will help you calculate the current value of a single sum that will be received in the future, taking into account a certain interest rate over a specific period. The concept of present value is important in finance as it allows us to understand how the value of money declines over time due to inflation and the opportunity cost of not having that money available for investment elsewhere.
The present value of 1 table provides the factor by which the future amount will be multiplied to give the present value. In the context of the bond example provided, this is a way to move money around in time, from present savers to present borrowers. The lender receives the present value of future repayments made by the borrower, which includes both interest and the principal amount.