What Is the Present Value (PV) of an Investment That

question 58

Multiple Choice

What is the present value (PV) of an investment that will pay $500 in one year's time, and $500 every year after that, when the interest rate is 10%?

• A) $2500
• B) $4000
• C) $3000
• D) $5000

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Definitions:

Debt to Assets Ratio

A financial metric measuring the proportion of a company's total assets financed through debt, indicating financial leverage and risk.

Times Interest Earned

A financial ratio that measures a company's ability to meet its debt obligations based on its current income, indicating financial stability against interest charges.

Coupon Interest Rate

The fixed rate of interest paid by a bond to its holder at specified intervals until maturity.

Market Interest Rate

The prevailing rate of interest determined by supply and demand in the money market that borrowers must pay and lenders receive.