The Price of a New Textbook Is $120 in One

question 425

Multiple Choice

The price of a new textbook is $120 in one year and is $150 two years later, while the price of a used copy of the text increased from $40 to $60. The relative price of a new textbook

• A) increased from 3 to 4.5.
• B) decreased from 0.8 to 0.67.
• C) decreased from 3 to 2.5.
• D) remained constant.

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Definitions:

Cash Flows

The sum of all money transfers into and from a business, significantly altering its capacity to handle liquid assets.

Annuity

A financial product delivering fixed payments to an individual, typically over a period of time or for life, often used for retirement savings.

Sinking Fund

An arrangement to guarantee that funds are available to pay off a bond’s principal at maturity.

Payments

The transfer of money or goods in exchange for products, services, or to fulfill a legal obligation.