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%

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