The Present Value of $200 to Be Paid to You

question 46

Multiple Choice

The present value of $200 to be paid to you at the end of two years, if the market interest rate is 5 percent, is

• A)$181.41
• B)$190.00
• C)$210.00
• D)$225.78
• E)cannot be determined from the information given

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Definitions:

Externalities

Economic side effects or consequences that affect uninvolved third parties; can be either positive or negative.

Socially Optimal Price

A price point at which the social cost of producing a good or service is equal to the social benefit derived from its consumption, leading to an efficient allocation of resources.

Units

A standard measure or quantity used as a means of expressing or accounting for something, such as in production, sales, or comparison.

Pollution Permits

Licenses issued by governments that allow the holder to emit a certain amount of pollution; these can be traded in a market.