If $10,000 Is Invested in a Certain Business at the Start

question 31

Multiple Choice

If $10,000 is invested in a certain business at the start of the year, the investor will receive $3000 at the end of each of the next four years. What is the net present value of this business opportunity if the interest rate is 7% per year?

• A) $148.53
• B) $178.88
• C) $161.63
• D) $172.45

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Definitions:

Consumer Surplus

The discrepancy between the total price consumers are ready to pay for a good or service and what they actually pay for it.

Producer Surplus

The disparity between the price at which sellers are prepared to offer a product and the actual selling price they get.

Consumer Surplus

The difference between the highest amount a consumer is willing to pay and the actual price paid.

Supply Shift

A change in the quantity of a good that suppliers are willing and able to sell at each price, represented by a shift of the supply curve to the left or right.