Zane Has Received a Prize Which Entitles Him to Receive

question 23

Multiple Choice

Zane has received a prize which entitles him to receive annual payments of $10,000 for the next 10 years. Which of the following is to be referred to in order to calculate the total value of the prize today?

• A)Present Value of $1
• B)Present Value of an Annuity of $1
• C)Future Value of $1
• D)Future Value of an Annuity of $1

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Definitions:

Reward to Volatility

A measure of the return an investment provides relative to its volatility, used in evaluating the performance of an investment's risk.

Portfolio Excess

Refers to the amount by which the return of a portfolio exceeds the return of a benchmark or risk-free rate.

Sharpe Measure

A method to assess the performance of an investment by adjusting for its risk, comparing the excess return over the risk-free rate to the standard deviation of returns.

Dollar-Weighted

A method of calculating an investment's return that takes into account the time and amount of each cash flow.