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You want to make a one-time deposit today that will increase in value to $100 at the end of this year. Which rate of interest will allow you to deposit the least amount today to reach this goal?

A. 3.8%
B. 2.6%
C. 2.9%
D. 3.6%
E. 3.4%

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Answer:

The correct answer is A.

Explanation:

Giving the following information:

You want to make a one-time deposit today that will increase in value to $100 at the end of this year.

The higher the interest rate, the least amount of money needed to achieve a certain objective.

i= 3.8%

PV= FV/(1+i)

PV= 100/1.038= $96.339

i= 3.6%

PV= 100/1.036= $96.52

i=3.4%

PV= 100/1.034= $96.71

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