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To Compute the Present Value of $1,000 Annuity Received at the End

question 2

Multiple Choice

To compute the present value of $1,000 annuity received at the end of each of the next three years and discounted at the rate of 5% per year, you should use the following EXCEL command.

Definitions:

Intercept

A term in mathematics and economics indicating the value where a function or line crosses an axis on a graph.

Budget Line

A budget line represents the combinations of two goods that a consumer can purchase with a given income and prices, illustrating the trade-off between the two goods.

Risk-free Asset

A Risk-free Asset is an investment with a certain return, with no risk of financial loss, often exemplified by government bonds.

Risky Asset

An investment with a significant degree of uncertainty in its future payoffs, including the potential for losing some or all of the original investment.