Principles of Economics, 7th Edition

Published by South-Western College
ISBN 10: 128516587X
ISBN 13: 978-1-28516-587-5

Chapter 27 - Part IX - The Basic Tools of Finance - Quick Check Multiple Choice - Page 582: 3

Answer

b. \$83.

Work Step by Step

The formula for the present value to be paid is $X/(1+r)^N$, where $X$ is the present value, $r$ is the interest rate, and $N$ is the number of years. $100/(1+0.1)^2 = 100/1.21 = 83$ The present value of \$100 to be paid in two years is \$83.
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