Given the Market Rate of Interest,the Present Value of $10,000

question 12

Multiple Choice

Given the market rate of interest,the present value of $10,000 to be received after a period of 5 years

• A)will be more than the present value of $10,000 to be received after a period of 4 years.
• B)will be less than the present value of $10,000 to be received after a period of 6 years.
• C)will be more than the present value of $10,000 to be received after a period of 6 years.
• D)will be the same as the present value of $10,000 to be received after a period of 6 years.
• E)will be the same as the present value of $10,000 to be received after a period of 4 years.

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Definitions:

Geometric Average Return

The average rate of return per period on an investment, compounded over multiple periods, which is calculated by taking the nth root of the total returns, where n represents the number of periods.

Stock

An investment vehicle that denotes holding equity in a firm, granting the holder rights to a fraction of the company's assets and earnings.

Geometric Average

A method of calculating the average rate of return of a set of values that is compounded over time.

Arithmetic Average

A measure of central tendency calculated by dividing the sum of all values in a dataset by the number of values.