Question

1. Assume you deposit $100 in an account at 10% interest rate and leave it in the account for three years. In year 3, the interest on previously received interest component will be equal to
a. $1.00
b. $21.00
c. $2.10
d. $ 0.21

2. Assume $ 400 to be received in year 4 has a present value equal to $350. If we keep the same interest rate assumption, but instead assume that the $400 is received in year 5 we know that the resulting present value must be

a. larger than $400
b. Larger than $350
c. smaller than $350
d. equal to $350

3. if we use zero as the number of time periods in the PV formula the formula will still give as a correct answer

true
false

Answer 1