Salvatore Has the Opportunity to Invest in a Scheme Which

question 15

Multiple Choice

Salvatore has the opportunity to invest in a scheme which will pay $5000 at the end of each of the next 5 years.He must invest $10,000 at the start of the first year and an additional $10,000 at the end of the first year.What is the net present value (NPV) of this investment if the interest rate is 4%?

• A)-$1410.67
• B)-$112.23
• C)$1248.56
• D)$2643.73
• E)$3210.15

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Definitions:

Required Condition

A necessary state or circumstance that must be met for something to occur or be considered true.

Probability Function

A function that associates a probability with each outcome in the sample space of a stochastic experiment.

Poisson Probability

A distribution showing the probability of a given number of events happening in a fixed interval of time or space.

Distribution

The way in which data points are spread out or distributed across various values.