Which of the Following Investments Would Have the Lowest Present

question 77

Multiple Choice

Which of the following investments would have the lowest present value? Assume that the effective annual rate for all investments is the same and is greater than zero.

• A) Investment A pays $250 at the end of every year for the next 10 years (a total of 10 payments).
• B) Investment B pays $125 at the end of every 6-month period for the next 10 years (a total of 20 payments).
• C) Investment C pays $125 at the beginning of every 6-month period for the next 10 years (a total of 20 payments).
• D) Investment D pays $2,500 at the end of 10 years (just one payment).
• E) Investment E pays $250 at the beginning of every year for the next 10 years (a total of 10 payments).

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Definitions:

Surplus

An excess amount of a commodity, product, or resource beyond what is needed or utilized.

Substitute Product

An alternative product that serves the same purpose or meets the same need as another.

Apple Juice

A beverage made by pressing and extracting the liquid from apples.

Orange Juice

A beverage made by extracting the liquid from oranges, often consumed for its nutritional value and taste.