Lara Is Going to Receive $10,000 a Year at the End

question 12

Multiple Choice

Lara is going to receive $10,000 a year at the end of each of the next five years from her insurer to meet her education cost. Using a discount rate of 14%, the present value of the receipts can be stated as:

• A)PV = $10,000 (Annuity FV factor, i = 14%, n = 5).
• B)PV = $10,000 (PV factor, i = 14%, n = 5).
• C)PV = $10,000 (Annuity PV factor, i = 14%, n = 5).
• D)PV = $10,000 (FV factor, i = 14%, n = 5).

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Definitions:

Contract Terms

The specific conditions, provisions, and obligations agreed upon by parties in a contract.

Commercial Lending

The provision of loans to businesses by financial institutions, encompassing a range of loan types such as term loans, lines of credit, and equipment financing.

Creditworthiness

Creditworthiness is an evaluation of an individual's or company's ability to repay a debt based on their financial history and current financial status.

Provisions

Estimates of future costs or liabilities that a company recognizes on its financial statements, reflecting expected obligations.