What Is the Present Value of 10 Annual Payments of $500

question 96

Multiple Choice

What is the present value of 10 annual payments of $500 at a discount rate of 12%?

• A) $1,332
• B) $1,761
• C) $1,840
• D) $2,825
• E) $3,040

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Definitions:

Risky Portfolio

A collection of investments that hold a significant level of risk, aiming for potentially higher returns.

Expected Rate of Return

The anticipated return on an investment, based on the probability of various outcomes, including both risky and risk-free returns.

Standard Deviation

A statistic that measures the dispersion or variability of a dataset relative to its mean, often used in finance to gauge investment risk.

Risky Asset

An investment that holds a significant chance of losing some or all of its value, offering the potential for higher returns to compensate for higher risk.