If the Interest Rate Is 13% and Will Remain 13

question 23

Multiple Choice

If the interest rate is 13% and will remain 13% forever, how much would a rational investor be willing to pay for an asset that will pay him 6,780 dollars 1 year from now, 1,276 dollars 2 years from now, and nothing at any other time?

• A)53,846.15 dollars
• B)6,000 dollars
• C)98,000 dollars
• D)7,000 dollars
• E)8,000 dollars

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Definitions:

True Ribs

True ribs are the top seven pairs of ribs that are directly attached to the sternum through costal cartilages, providing protection to the thoracic cavity.

Vertebrae

The individual bones making up the vertebral column (spine) in humans and other vertebrates.

Ribs

The long curved bones which form the rib cage, providing protection to the thoracic organs.

Intervertebral Discs

The cartilage discs that sit between the bones (vertebrae) in the spine, acting as shock absorbers and allowing flexibility.