An Investment Is Expected to Yield $300 in Three Years,$500

question 52

Multiple Choice

An investment is expected to yield $300 in three years,$500 in five years,and $300 in seven years.What is the present value of this investment if our opportunity rate is 5%?

• A) $735
• B) $864
• C) $885
• D) $900

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Definitions:

Significant Decline

A substantial reduction in value or quantity over a period, often used to describe a marked drop in financial markets, asset values, or economic conditions.

Equity Method

An accounting technique used by companies to assess the profits earned through their investments in other companies.

Fair Value

The remuneration for divesting an asset or the compensation needed to transfer a liability in an orderly market exchange at the calendar mark for assessment.

Temporary Decline

A short-term decrease in the value or performance of an asset or market, expected to recover over time.