Multiple Choice
What is the present value of a \$350 payment to be received in one year if the discount rate is 10\%?
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10. Time Value of Money
Time Value of Money Equations
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Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
In the Excel PMT function, which argument corresponds to the interest rate per period?
A
The fourth argument (fv)
B
The second argument (nper)
C
The first argument (rate)
D
The third argument (pv)
Verified step by step guidance1
Understand the PMT function in Excel: The PMT function calculates the payment for a loan based on constant interest rates and fixed payments over a specified period.
Identify the arguments of the PMT function: The PMT function has five arguments: rate (interest rate per period), nper (number of periods), pv (present value or loan amount), fv (future value, optional), and type (optional, indicating when payments are due).
Focus on the 'rate' argument: The 'rate' argument corresponds to the interest rate per period. For example, if the annual interest rate is 6% and payments are made monthly, the rate per period would be 6% divided by 12.
Clarify the role of other arguments: The second argument, 'nper,' represents the total number of payment periods. The third argument, 'pv,' is the present value or the loan amount. The fourth argument, 'fv,' is the future value, which is optional and defaults to 0.
Conclude that the first argument, 'rate,' is the correct answer for the interest rate per period in the PMT function.
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