Which Has a Greater Present Value,a Future Value of $300,000

question 45

Multiple Choice

Which has a greater present value,a future value of $300,000 received in year 6,or an end-of-the-year annuity (first cash flow exactly one year from today) of $75,000 that lasts for four years if the relevant interest rate is 0%?

• A)The future value of $300,000 is preferred.
• B)The annuity has a greater present value.
• C)You are indifferent to these two sets of cash flows on a present value basis.
• D)You can't properly answer this question because the interest rate is 0%.

---

Definitions:

Behavior

The actions or reactions of a person or animal in response to external or internal stimuli.

Human Mind

The set of cognitive faculties that enables consciousness, perception, thinking, judgement, and memory—a characteristic of humans but not of all living things.

Cognitive Effort

The mental energy used in the process of acquiring knowledge and understanding through thought, experience, and the senses.

Objects

Physical items or entities that can be perceived or understood by the senses or through cognitive processes.