Read the Following Scenario, and Answer the Questions Below

question 25

Multiple Choice

Read the following scenario, and answer the questions below.

As an economist, you are asked to analyze the present versus future value of fossil fuel resources in a newly discovered oil field. You determine that the oil which would take 1 year to extract) is estimated to be worth $10 million in today's market.

-You are asked to advise whether to immediately begin extracting the oil or wait 5 years to begin extraction.If the annual interest rate is 5%,at least how much would the oil have to be worth in the future market for you to advise waiting 5 years to begin extraction? Assume that you are asked to base your recommendation solely on the money earned.

• A)Approximately $20 million
• B)Approximately $10.5 million
• C)Approximately $13 million
• D)Approximately $12 million

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Definitions:

Independently

Acting or functioning without dependence on others; autonomously.

Observing

The act of carefully watching and examining phenomena, environments, or behaviors to gather information.

Onlooker Play

A stage of child play where the child observes others playing but does not join in, often seen as a critical stage in social development.

Observing

The act of carefully watching and noting phenomena as they occur in order to gather information or come to a conclusion.