Which of the Following Investments Would Have the Lowest Present

question 131

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 eyear for the next 10 years (a total of 10 payments).
• B) Investment B pays $125 at the end of e6-month period for the next 10 years (a total of 20 payments).
• C) Investment C pays $125 at the beginning of e6-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 eyear for the next 10 years (a total of 10 payments).

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Definitions:

HDC Status

A legal term describing the status of a holder in due course, who acquires a negotiable instrument under certain conditions, granting them rights free from many defenses.

Sufficient Consideration

Consideration in contract law that is adequate and meets legal requirements, ensuring the contract is binding and enforceable.

Promissory Note

A financial document in which one party promises to pay another party a specified sum of money at a defined future date or on demand.

Payable

Refers to the amount of money that is owed by an individual or organization and is due to be paid.