What Is the Present Value of $1,000 Payments Received at the Beginning

question 66

Multiple Choice

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

• A) $7,069.13
• B) $7,093.62
• C) $7,492.64
• D) $7,914.10
• E) $8,165.12

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Definitions:

Variable-Rate Loan

A loan where the interest rate can change, based on an underlying benchmark or index that reflects the cost to the lender of borrowing on the credit markets.

Increases In Interest Rates

A scenario where central banks or financial institutions decide to raise the cost of borrowing money.

Cap

An upper limit set on the amount of money that can be charged or paid in a certain situation, such as interest rates on a loan or fees.

Cross-Hedging

Cross-hedging involves using a hedge to manage risk by investing in a financial instrument that is not directly correlated to the underlying asset but has similar price movements.