The Solution to This Problem Requires Time Value of Money

question 139

Multiple Choice

The solution to this problem requires time value of money calculations.Reference to Tables 9-1 through 9-4 in the text is necessary to complete the calculations.
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The present value of $7,000 to be received in seven years at 7% compounded annually is

• A)$3,430.
• B)$6,657.
• C)$4,361.
• D)$7,000.

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Definitions:

Consumer Surplus

Consumer surplus is the difference between the total amount consumers are willing and able to pay for a good or service and the total amount they actually pay.

Property Rights

The legal rights to own, use, and dispose of assets including real estate, personal possessions, and intellectual property.

Producer Surplus

The difference between what producers are willing and able to sell a product for and the actual price they receive, representing the extra benefit to producers.

Consumer Surplus

The difference between the total amount that consumers are willing to pay for a good or service and the total amount they actually pay.