Which of the following options in a financial function indicates the…

The correct answer is Option (4) → Rate

In Excel financial functions such as PV, FV and PMT, the argument rate is the interest rate per period. The RATE function itself returns the interest rate per period of an annuity.

Option (1) FV — Incorrect. FV is the future value of an investment.

Option (2) Nper — Incorrect. Nper is the total number of payment periods.

Option (3) PV — Incorrect. PV is the present value.

Option (4) Rate — Correct.

Note: This question is the book’s exercise MCQ 1 word for word. The book’s answer key prints “1. b” (PV), which is a misprint: in the book’s own text, rate is the interest rate per period, so the answer is (d) Rate.