An Investment Costs $1,000 (CF at T = 0) and Is

question 82

Multiple Choice

An investment costs $1,000 (CF at t = 0) and is expected to produce cash flows of $75 at the end of each of the next 5 years,then an additional lump sum payment of $1,000 at the end of the 5th year.What is the expected rate of return on this investment?

• A)6.77%
• B)7.13%
• C)7.50%
• D)7.88%

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Definitions:

Contract Theory

A theory in legal and political philosophy regarding how contracts and agreements form the foundations of societies and governments, focusing on mutual consent and obligations.

Thomas Hobbes

A 17th-century English philosopher known for his work in political philosophy, particularly his social contract theory as outlined in his book "Leviathan," emphasizing a powerful sovereign for societal peace.

Ordered Society

An ordered society is a community or civilization that operates under a system of laws, norms, and institutions that ensure stability, harmony, and structured social interactions among its members.

Boston Tea Party

A political protest by the Sons of Liberty in Boston, on December 16, 1773, against the tax policy of the British government by throwing chests of tea from ships into Boston Harbor.