You Will Receive a Stream of $50 Payments BEGINNING at the End

question 109

Multiple Choice

You will receive a stream of $50 payments BEGINNING at the end of year 1 until the final payment at the end of year 5.What amount will you have at the end of year 5 if you can invest all amounts at a 9% interest rate?

• A) $194.48
• B) $200.00
• C) $228.67
• D) $299.24

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Definitions:

Pledging Receivables

Borrowing money using receivables as collateral.

Effective Cost

The total cost of a financing option, including all fees and interest, adjusted for any discounts or premiums, providing a true comparison of costs.

Annual Rate

Annual rate often refers to the interest rate for a period of one year, but can also apply to any annualized financial metric intended to allow comparison over a year's period.

Implied Annual Cost

The total cost associated with financing or an investment, expressed on a yearly basis, often calculated through the analysis of implied rates or costs.