Salvatore Has the Opportunity to Invest in a Scheme Which

question 63

Multiple Choice

Salvatore has the opportunity to invest in a scheme which will pay $5 000 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 present value of this investment if the interest rate is 4%?

• A)$1 248.56
• B)-$1 410.67
• C)$2 643.73
• D)-$112.23

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Definitions:

Municipal Bond

A debt security issued by a city, municipality, or county to finance its capital expenditures, typically offering tax-exempt interest payments.

Corporate Bond

A debt security issued by corporations to finance their operations, which promises to pay the holder a specified rate of interest and return the principal at maturity.

Tax Bracket

A range of incomes taxed at a certain rate within a tax system, where the tax rate typically increases as income rises.

Before-tax Yield

The earnings or return on an investment before the deduction of any taxes.