Salvatore Has the Opportunity to Invest in a Scheme Which

question 15

Multiple Choice

Salvatore has the opportunity to invest in a scheme which will pay $5000 at the end of each of the next 5 years.He must invest $10,000 at the start of the first year and an additional $10,000 at the end of the first year.What is the net present value (NPV) of this investment if the interest rate is 4%?

• A)-$1410.67
• B)-$112.23
• C)$1248.56
• D)$2643.73
• E)$3210.15

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Definitions:

Perfectly Inelastic

A market situation where the quantity demanded or supplied is completely unresponsive to price changes.

Demand Determined

A market characteristic where the quantity of products or services provided is primarily set by the level of demand.

Fixed Supply

A situation where the quantity of a specific good available in the market cannot be altered in the short term.

Labor Productivity

A measure of economic performance that compares the amount of goods and services produced with the number of hours worked.