What Is the Present Value of an Investment That Pays

question 96

Multiple Choice

What is the present value of an investment that pays $10,000 every year at year-end for the next five years and $15,000 every year at year-end for years six through 10? The annual rate of interest for the investment is 9%.

• A) $125,000.00
• B) $97,250.00
• C) $135,173.00
• D) $76,827.50

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Definitions:

Securities

Financial instruments representing ownership (stocks), a debt agreement (bonds), or rights to ownership (derivatives).

Publicly Available Information

Information that is not restricted and can be accessed by the general public, often used in the context of financial data and company disclosures.

Abnormal Return

A term used in finance to describe the profits or losses from a security or portfolio that differ significantly from expected or average returns.

Operating Segments

Components of a business that engage in business activities from which they may earn revenues and incur expenses, including results that are reviewed by the company's management.