You Have Purchased a New Mattress for $2 000,and the Store

question 169

Multiple Choice

You have purchased a new mattress for $2 000,and the store has given you a "12 months,same as cash" deal.This means that you do not actually have to pay for the mattress for another year.One year from now,you will have to give the store the full price of $2 000.If the annual interest rate is 10%,how much money do you need today to ensure that you will have $2 000 1 year from today?

• A) $1 980
• B) $1 818
• C) $2 200
• D) $20 000

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Definitions:

Dividend Cuts

A reduction in the dividend payments issued by a company, which can signify financial distress or a reallocation of funds.

Debt-Equity Ratio

A measure of a company's financial leverage calculated by dividing its total liabilities by its shareholder equity.

NPV Projects

Projects assessed using Net Present Value, a method that calculates the difference between the present value of cash inflows and outflows over a period of time to evaluate and compare investments.

Distributions

In finance, distributions refer to payments made by various entities, such as mutual funds or investments, to shareholders or partners.