Investment Options a and B Are Equally Risky and Have

question 87

Multiple Choice

Investment options A and B are equally risky and have identical initial costs.Each investment will produce cash inflows of $20,000.Option A will pay $8,000 the first year followed by four annual payments of $3,000 each.Option B will pay five annual payments,starting in 1 year,of $4,000 each.Which one of the following statements is correct given these two investment options? Assume a positive rate of return.

• A)Neither investment should be undertaken.
• B)Option A is the better investment.
• C)Option B has a higher net present value.
• D)Option B has a lower future value at Year 5.
• E)Both options are of equal value.

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Definitions:

Alkalinity

the measure of the capacity of water or a solution to neutralize acids, often indicated by its pH level.

Concentration

In chemistry, the measure of the amount of a given substance contained in a unit volume of a liquid or solid material.

Dissolved

The process by which a solid becomes incorporated into a liquid to form a solution.

Conjugated Bilirubin

A form of bilirubin that is water soluble and has been processed by the liver, making it a useful measure of liver function and health.