Of the Following Investments, Which Would Have the Lowest Present

question 1

Multiple Choice

Of the following investments, which 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:

Olanzapine

An antipsychotic medication used to treat mental disorders such as schizophrenia and bipolar disorder, affecting specific neurotransmitter pathways in the brain.

Schizophrenia

A severe mental disorder characterized by distorted thoughts, perceptions, emotions, language, sense of self, and behavior.

SSRIs

Short for Selective Serotonin Reuptake Inhibitors, a class of drugs commonly used in the treatment of depression and anxiety disorders by affecting serotonin levels in the brain.

Serotonin

A neurotransmitter associated with regulating mood, appetite, sleep, memory, and learning; imbalances are linked to depression and anxiety disorders.