Question

The present value of a future amount of money is the amount​ that, if invested​ today, will grow to be as large as that ​ _____ amount when the interest that it will earn is​ _____ into account. The calculation that we use to convert a​ _____ amount of money to its​ _____ value is called discounting.

A. ​present; taken; ​present; future
B. ​future; taken; ​present; future
C. ​future; not​ taken; ​future; present
D. ​future; taken; ​future; present

Answer 1

D. ​future; taken; ​future; present

Step-by-step explanation:

The present value of a future amount of money is the amount​ that, if invested​ today, will grow to be as large as that ​ ​future amount when the interest that it will earn is​ taken into account. The calculation that we use to convert a​ future amount of money to its​ present value is called discounting.

The present value is the dollar value at t=0 of a future sum. The discounting process is done using the following formula;

Present value ; PV = FV/(1+r)^t

The future value(FV) is discounted at the interest rate (r) taking into the account the total duration of the investment as well.