Suppose That the Interest Rate Is 5 Percent

question 27

Multiple Choice

Suppose that the interest rate is 5 percent.Consider three payment options: 1.$500 today.
2) $520 one year from today.
3) $550 two years from today.
Which of the following is correct?

• A)1 has the lowest present value and 3 has the highest.
• B)2 has the lowest present value and 1 has the highest.
• C)3 has the lowest present value and 2 has the highest.
• D)None of the above is correct.

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