A Bank Lends Some Money to a Business

question 41

Multiple Choice

A bank lends some money to a business. The business will pay the bank a single payment of $176,000 in ten years' time. How much greater is the present value (PV) of this payment if the interest rate is 9% rather than 8%?

• A) $7178
• B) $5742
• C) $8613
• D) $10,049

---

Definitions:

Poisson Distribution

A statistical probability distribution that expresses the probability of a given number of events occurring in a fixed interval of time or space when these events occur with a known constant mean rate and independently of the time since the last event.

Negative Exponential Distribution

A probability distribution used to model time between independent events that occur at a constant average rate.

Average Arrival Rate

The average rate at which entities (such as customers or products) arrive at a specific point or system over a defined period.

M/D/1

A notation in queue theory representing a system with a single server, where arrivals are Markovian (Poisson process), service times are deterministically fixed, and there is one server.