The Present Value of a Promise to Pay $5, 000

question 146

Multiple Choice

The present value of a promise to pay $5, 000 every year forever when the prevailing interest rate is 10 percent equals

• A)$5, 000
• B)$50, 000
• C)$100, 000
• D)$250, 000
• E)$500, 000

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Definitions:

Speculation

The act of forming theories or conjectures without firm evidence, often about financial markets or future events.

Cause

A factor or event that brings about an effect or a change in a situation.

Logical Arguments

Reasoning presented in a structured and coherent manner to persuade or explain, based on principles of logic.

Indirect Approach

A communication strategy where the main point is not stated directly at the beginning but is embedded within the message.