Calculate Which Has a Higher Present Value: an Annual Payment

question 68

Essay

Calculate which has a higher present value: an annual payment of $100 received over 3
years or an annual payment of $50 received over 7 years. In both cases the interest rate is 7% (or
0.07).

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Definitions:

Propensity

An inclination or natural tendency to behave in a certain way.

Blood Relative

A person who shares an ancestor with another, indicating a family connection by birth rather than marriage.

Addictive Parent

A term drawing attention to the challenges and dynamics within families where one or more parents have substance abuse issues.

Methamphetamine

A powerful, highly addictive stimulant that affects the central nervous system.