Sign Up

Sign Up to our social questions and Answers Engine to ask questions, answer people’s questions, and connect with other people.

Sign In

Login to our social questions & Answers Engine to ask questions answer people’s questions & connect with other people.

Forgot Password

Lost your password? Please enter your email address. You will receive a link and will create a new password via email.

You must login to ask a question.

Please briefly explain why you feel this question should be reported.

Please briefly explain why you feel this answer should be reported.

Please briefly explain why you feel this user should be reported.

Share & grow the world's knowledge!

We want to connect the people who have knowledge to the people who need it, to bring together people with different perspectives so they can understand each other better, and to empower everyone to share their knowledge.

Which one of the following will produce the lowest present value interest factor

Question

Which one of the following will produce the lowest present value interest factor?

a) 6 percent interest for 5 years

b)6 percent interest for 8 years

c) 6 percent interest for 10 years

d) 8 percent Interest for 5 years

e) 8 percent interest for 10 years

Explanation

To determine which of the given options will produce the lowest present value interest factor (PVIF), we need to understand what a PVIF is and how it is calculated.

A Present Value Interest Factor (PVIF) is a factor used in financial calculations to find the present value of a future cash flow. It’s calculated using the formula:

PVIF = 1 / (1 + r)^n

Where:

  • PVIF is the present value interest factor.
  • r is the interest rate per period.
  • n is the number of periods.

In this case, we are given two interest rates (6 percent and 8 percent) and three different time periods (5, 8, and 10 years). We need to calculate the PVIF for each option and see which one produces the lowest value. Lower PVIF indicates a lower present value, which means less value in today’s terms.

Let’s calculate the PVIF for each option:

a) 6 percent interest for 5 years: PVIF_a = 1 / (1 + 0.06)^5

b) 6 percent interest for 8 years: PVIF_b = 1 / (1 + 0.06)^8

c) 6 percent interest for 10 years: PVIF_c = 1 / (1 + 0.06)^10

d) 8 percent interest for 5 years: PVIF_d = 1 / (1 + 0.08)^5

e) 8 percent interest for 10 years: PVIF_e = 1 / (1 + 0.08)^10

Now, let’s calculate these values:

a) PVIF_a ≈ 0.7473 b) PVIF_b ≈ 0.7118 c) PVIF_c ≈ 0.5584 d) PVIF_d ≈ 0.6806 e) PVIF_e ≈ 0.4632

Comparing these values, we can see that the lowest present value interest factor is for option (e) – “8 percent interest for 10 years.” So, option (e) will produce the lowest PVIF among the given choices.

Leave a comment

Latest News & Updates

QuizlyPro Latest Articles

McMann Solutions Inc. knowingly violates the Clean Water Act by discharging hazardous pollutants into a nearby river

McMann Solutions, Inc., knowingly violates the Clean Water Act by discharging hazardous pollutants into a nearby river. McMann Solutions is subject to a. neither a fine or imprisonment. b. fines but no criminal charges or imprisonment because a corporation cannot ...

Farm and Ranch Supply Co. discovers a cache of an unknown herbicide in a back corner of its warehouse

Farm and Ranch Supply Co. discovers a cache of an unknown herbicide in a back corner of its warehouse. Farm and Ranch repackages the product, relabeling it as “Farmer’s Friend” and stating on the label and in advertisements that it ...

Tiger Stripe owns and operates gasoline filling stations. Patrick’s Trucking delivers fuel to Tiger Stripe’s storage facility on a regular basis

Tiger Stripe owns and operates gasoline filling stations. Patrick’s Trucking delivers fuel to Tiger Stripe’s storage facility on a regular basis. On one occasion, Patrick fails to pay proper attention to his truck when he is unloading fuel into Tiger ...

Explore Our Blog