You Expect to Receive $5,000 in 25 Years

question 153

Multiple Choice

You expect to receive $5,000 in 25 years.How much is it worth today if the discount rate is 5.5%?

• A) $1,067.95
• B) $1,124.16
• C) $1,183.33
• D) $1,245.61
• E) $1,311.17

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Definitions:

European Call Option

A financial contract that gives the buyer the right, but not the obligation, to buy a certain asset at a specified price (strike price) on a specified date.

Strike Price

The specified price at which the holder of a financial option can buy (in the case of a call option) or sell (in the case of a put option) the underlying asset.

European Put Option

A contract that gives the holder the right, but not the obligation, to sell a specified amount of an underlying asset at a predetermined price on or before a specified date.

Reorder Point

The inventory level at which a new order should be placed to replenish stock before it runs out, considering lead time.