Which of the Following Investments Has a Higher Present Value

question 67

Multiple Choice

Which of the following investments has a higher present value, assuming the same (strictly positive) interest rate applies to both investments?

• A)Investment X has a higher present value.
• B)Investment Y has a higher present value.
• C)Investment X and Investment Y have the same present value, since the total of the cash flows is the same for both.
• D)No comparison can be made-we need to know the interest rate to calculate the present value.

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Definitions:

Production

The process of creating goods and services through the combination of labor, materials, and technology.

Pizza

A popular Italian dish made of dough topped with tomatoes, cheese, and often various other ingredients, baked together.

Marginal Benefit

The additional satisfaction or utility received by consuming one more unit of a good or service.

Additional Slice

A term that can refer to an extra serving or portion of a good or product beyond what is normally consumed.