I Am Promised a Payment of $250 a Year from Now

question 26

Multiple Choice

I am promised a payment of $250 a year from now, repeating every year for a total of ten years. I can invest money at 10% interest, but the inflation rate over the next ten years is expected to be 5%. What is the smallest amount of money you could offer me right now that would persuade me to give up these payments?

• A)250(P/A,0.05,10)
• B)250(P/A,0.15,10)
• C)250(A/P,0.1,10)
• D)250(P/A,0.155,10)
• E)250(P/A,0.165,10)

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Definitions:

Federal Trade Commission Act

The federal law of 1914 that established the Federal Trade Commission.

Alcoa Case

A 1945 case in which the courts ruled that the possession of monopoly power, no matter how reasonably that power had been used, was a violation of the antitrust laws; temporarily overturned the rule of reason applied in the U.S. Steel case.

Structuralist Approach

A methodology in economics and social sciences that focuses on understanding the underlying structures that shape economic outcomes.

Treble Damages

A legal remedy that allows a court to triple the amount of the actual or compensatory damages awarded to the plaintiff, often used in antitrust and patent infringement cases.