You Are Presented with Two Cash Flow Options: Option Near,a

question 6

Multiple Choice

You are presented with two cash flow options: Option Near,a $5,000 annuity for three years,with the first cash flow one year from today,or Option Far,a $5,000 annuity for six years with the first cash flow ten years from today.Assuming an interest rate of 7.0%,which set of cash flows has a greater present value?

• A)Option Near has a greater PV of $13,121.58 vs.Option Far PV of $12,963.41.
• B)Option Far has a greater PV of $13,121.58 vs.Option Near PV of $12,963.41.
• C)Option Far has a greater PV of $30,000 vs.Option Near PV of $15,000.
• D)Option Near and Option Far have the same PV of $12,963.41.

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Definitions:

Action Potential

A short-lasting event in which the electrical membrane potential of a cell rapidly rises and falls, allowing neurons to transmit signals.

Neural Impulse

An electrical signal that travels along a neuron, enabling communication between neurons and between neurons and muscles.

Resting Potential

The electrical charge of a neuron when it is not actively firing, establishing a state of potential energy that enables neural communication.

Firing

In the context of neurons, it refers to the transmission of an electrical signal along the neuron.