Consider the Following Timeline: If the Current Market Rate

question 73

Multiple Choice

Consider the following timeline: If the current market rate of interest is 9%, then the present value of this timeline as of year 0 is closest to:

• A)$492
• B)$637
• C)$600
• D)$400

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Definitions:

Consumption

The act of using goods and services by households, leading to the decrease in value of goods and the depletion of services.

Market Saturated

A situation in a market where the volume of a product or service has reached its maximum capacity, limiting the opportunity for new growth or expansion.

Thorstein Veblen

An American economist and sociologist known for his theory of the leisure class and criticisms of capitalism.

Milton Friedman

An influential American economist known for his strong advocacy of free-market capitalism and for his role in the Chicago School of Economics.