What Is the Present Value of a $750 Payment Made

question 88

Multiple Choice

What is the present value of a $750 payment made in three years when the discount rate is 5 percent?

• A) $646.96
• B) $647.88
• C) $712.50
• D) $868.22

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Definitions:

Interest Rate

The percentage of a sum of money charged for its use, typically expressed as an annual percentage rate.

Economic Resource

Assets, materials, or inputs used to produce goods and services and satisfy human wants, including land, labor, capital, and entrepreneurship.

Capital

Man-made physical objects (factories, roads) and intangible ideas (the recipe for cement) that do not directly satisfy human wants but which help to produce goods and services that do satisfy human wants; also called capital goods. One of the four economic resources.

Economic Rent

Any payment to a resource provider or seller of output in excess of the economic cost (opportunity cost) of providing that resource or output.