Consider a Three-Year Fixed-Payment Security That Has a Present Value

question 41

Multiple Choice

Consider a three-year fixed-payment security that has a present value of $1,000.If the annual rate of discount is 7 percent, the payment made at the end of each year is

• A)$70.00.
• B)$107.00.
• C)$142.86.
• D)$381.05.

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Definitions:

Economic Life

The expected period during which an asset remains useful to the average owner.

Face Value

The nominal or dollar value printed on a financial instrument, such as a bond or stock certificate.

Required Return

The minimum profit or yield that investors expect or require from an investment.

Interest

The cost of borrowing money or the income earned from lending money, usually expressed as a percentage of the principal.