16
practice examMultiple Choice

Practice Exam

Question 16 • Mathematics for Data and Financial Literacy

Hugo expects his investment to grow to $75,000 in 20 years. The current CPI is 100 , and the CPI in 20 years is expected to be 150 What is the present value of the $75,000 in today's dollars? Use this formula to calculate the present value using the CPI: present value=(future value)/((future CPI)/(current CPI))

Answer
A
$75,000
B
$70,000
C
$60,000
D
$50,000

Explanation

Divide the future value by the ratio of future CPI to current CPI: $75,000 ÷ (150 ÷ 100) = $75,000 ÷ 1.5 = $50,000. Therefore, the present value in today's dollars is $50,000, choice D.

AI-written and checked against the verified answer.

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