Arun Wants to Have $500 at the END of Every

question 123

Multiple Choice

Arun wants to have $500 at the END of every year for 20 years. The bank pays 11% interest, compounded annually. Arun calculates that the present value of the ordinary annuity is $3,981.67. What would be the present value if payments were to be received at the BEGINNING of every period rather than the END?

• A) $5,183.91
• B) $5,525.98
• C) $4,043.26
• D) $4,419.65

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Definitions:

Comparative Advantage

The capacity of a country or firm to produce a particular good or service at a lower marginal and opportunity cost over another.

Absolute Advantage

The ability of a country or entity to produce a good or service more efficiently (using fewer resources) than another country or entity.

Specialization

Refers to the process of focusing resources on specific activities, tasks, or areas of expertise to increase efficiency and productivity.

Free Trade

An economic policy that allows imports and exports between countries without tariffs, quotas, or other restrictions.