Assume That You Have the Opportunity to Receive $7,000 at the End

question 61

Multiple Choice

Assume that you have the opportunity to receive $7,000 at the end of each of the next seven years. Given an interest rate of 7%, how much would you be willing to pay for this investment today? Use the present value of an ordinary annuity interest factor table shown below.
Excerpt from present value of an ordinary annuity interest factor table
$$\begin{array} { | c | c | c | c | c | c | } \hline \text { Periods } & \mathbf { 6 \% } & \mathbf { 7 \% } & \mathbf { 8 \% } & \mathbf { 9 \% } & \mathbf { 1 0 \% } \\\hline 1 & 0.94340 & 0.93458 & 0.92593 & 0.91743 & 0.90909 \\\hline 2 & 1.83339 & 1.80802 & 1.78326 & 1.75911 & 1.73554 \\\hline 3 & 2.67301 & 2.62432 & 2.57710 & 2.53129 & 2.48685 \\\hline 4 & 3.46511 & 3.38721 & 3.31213 & 3.23972 & 3.16987 \\\hline 5 & 4.21236 & 4.10020 & 3.99271 & 3.88965 & 3.79079 \\\hline 6 & 4.91732 & 4.76654 & 4.62288 & 4.48592 & 4.35526 \\\hline 7 & 5.58238 & 5.38929 & 5.20637 & 5.03295 & 4.86842 \\\hline\end{array}$$

• A) $33,366
• B) $36,445
• C) $37,725
• D) $41,799

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The total of all costs used to create a product or service, which has been sold.

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