Which of the Following Decisions Would Involve the Use of the Present

question 64

Multiple Choice

Which of the following decisions would involve the use of the present value of $1?

• A)Your brother buys your car and offers to pay you $500 now or $1,500 in two years
• B)You win a lawsuit and are offered a lump sum payment today of $100,000 or $15,000 a year for 20 years
• C)Your father and mother wish to deposit enough money on the date of your high school graduation to enable you to take a $7,000 cruise when you graduate from college in 4 years
• D)You want to have $1,000,000 in order to retire at age 55,but need to know how much you will need to deposit each year from now until your 55th birthday

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Definitions:

CPI

Stands for Consumer Price Index, a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care.

CPI

The Consumer Price Index tracks the average variation in prices that urban consumers pay for a selection of consumer goods and services over a period of time.

Escalating Inflation

A situation where the rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling, accelerates over a period.

CPI

The Consumer Price Index measures the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.