Suppose That the Present Value of Receiving a Guaranteed $450

question 28

Multiple Choice

Suppose that the present value of receiving a guaranteed $450 in two years is $385.80.The opportunity rate of return on similar risk investments is 8 percent.According to this information, all else equal, which of the following statements is correct?

• A)It always would be preferable to wait two years to receive the $450 because this value is greater than the present value.
• B)Risk averse investors always would prefer to take the $385.80 today because it is a guaranteed amount whereas there is uncertainty as to whether the future amount will be paid.
• C)No investor should be willing to pay more than $385.80 for such an investment.
• D)It is apparent the present value was computed incorrectly because the present value of a future amount always should be greater than the future value.
• E)None of the above is a correct answer.

Know the varieties of data sources available for marketing research.

Understand the importance of generalizing research findings for marketing actions.

Differentiate between marketing input data and marketing outcome data.

Understand the factors that influence options pricing and valuation.

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Definitions:

Groupthink

The tendency for group members to reach a consensus at all costs.

Historical Events

Key moments or occurrences in history that have had a significant impact on societies, cultures, or the geopolitical landscape.

Conditions

Circumstances or factors affecting the way individuals live or work, especially with regard to their well-being.

Voluntary Groups

Organizations or associations whose membership and activities are chosen freely by individuals without mandatory participation.