question archive 1)Everything else equal, which of the following conditions will result in the lowest present value of $100 to be received in three years? A) annual compounding B) quarterly compounding C) monthly compounding d) daily compounding
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1)Everything else equal, which of the following conditions will result in the lowest present value of $100 to be received in three years?
A) annual compounding
B) quarterly compounding
C) monthly compounding
d) daily compounding
D. daily compounding
explanation:
This equation can be explained to P (1 + r)n, with the superscript n equal to the number of years. Thus, the amount of money in the account after 3 years is P (1 + r)3. For this example, 100 (1 + 0)3x360= 1,080 = 100 (0)1,080 = 100 *0 = 0, rounded to 2 decimal places.
Note: Interest rate not given but based on the theoretical daily compounding would incur the lowest present value because the interest would be divided into 365 which is the number of days in a year.
Step-by-step explanation
all explanation in the answer.