Suppose the Interest Rate Is 7 Percent

question 112

Multiple Choice

Suppose the interest rate is 7 percent.Consider four payment options:
Option A: $500 today.
Option B: $550 one year from today.
Option C: $575 two years from today.
Option D: $600 three years from today.
-Which of the payments has the lowest present value today?

• A)Option A
• B)Option B
• C)Option C
• D)Option D

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Definitions:

Beginning Inventory

The value of all the inventory held by a company at the start of an accounting period.

Ending Inventory

The total value of all inventory items that a company has in stock at the end of an accounting period.

Beginning Inventory

The value of inventory on hand at the start of an accounting period, consisting of raw materials, work-in-process, and finished goods.

Ending Inventory

The value of goods available for sale at the end of an accounting period, calculated as the sum of beginning inventory plus purchases minus cost of goods sold.