How Would We Compute the Present Discounted Value of Payments

question 138

Multiple Choice

How would we compute the present discounted value of payments of $8,000 received three years in the future and $10,000 received four years in the future? The interest rate is expected to be 5 percent for the next four years.

• A) 8,000/((1.05)³) + 10,000/((1.05)⁴)
• B) 8,000/((1.5)³) + 10,000/((1.5)⁴)
• C) 8,000/(1.05) + 10,000/((1.05)²)
• D) 8,000/(1.03) + 10,000/(1.04)

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