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:

Comparative Advantage

The ability of an entity to produce a good or service at a lower opportunity cost than others.

Lowest Opportunity Cost

The situation where the choice made uses the least possible sacrifice of alternatives, having the minimal foregone benefits among all options.

Produce More

The act of increasing the output or quantity of goods or services produced by a company, entity, or individual.

Trade Restrictions

Government-imposed limitations on the free exchange of goods and services between countries.