If the interest rate is 8% per year, the present value of a $1,000 gift that you

ID: 1102010 • Letter: I

Question

If the interest rate is 8% per year, the present value of a $1,000 gift that you will receive one year from today (rounded to the nearest dollar) is $______

a. $857

b. $926

c. $1080

d. $12,500

Again, if the interest rate is 8% per year, the present value of a $,1000 gift that arrives TWO years from today (rounded to the nearest dollar) is $______

a. $12,500

b. $857

c. $926

d. $1080

Now suppose the interest rate is 7% per year, the present value of a $1,000 gift that arrives(again) two years from today (rounded to the nearest dollar) is $______.

a. $935

b. $14,286

c. $873

d. $1,070