What Is the Future Value in 10 Years of $1,000

question 161

Multiple Choice

What is the future value in 10 years of $1,000 payments received at the beginning of each year for the next 10 years? Assume an interest rate of 5.625%.

• A) $12,259.63
• B) $12,949.23
• C) $13,679.45
• D) $14,495.48
• E) $14,782.15

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Definitions:

Internal Rate of Return (IRR)

A method of calculating an investment's rate of return that makes the net present value of all cash flows equal to zero.

Mutually Exclusive Investments

Mutually exclusive investments are investment options where the choice of one alternative precludes the selection of another, requiring a careful comparison to choose the best option.

Capital Rationing

Occurs when investors or management place a constraint on the size of the firm’s capital budget during a particular period.

Accounting Rate of Return

A financial ratio that measures the profitability of an investment by dividing the average annual profit by the initial investment cost.