Suppose the Interest Rate Is 8 Percent

question 331

Multiple Choice

Suppose the interest rate is 8 percent. Consider three payment options:
1) $200 today.
2) $220 one year from today.
3) $240 two years from today.
Which of the following is correct?

• A) Option 1 has the highest present value and Option 2 has the lowest.
• B) Option 2 has the highest present value and Option 3 has the lowest.
• C) Option 3 has the highest present value and Option 1 has the lowest.
• D) None of the above is correct.

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Definitions:

Psychologically Evolved Mechanism

A cognitive structure or adaptation that has been developed through natural selection to solve specific problems related to survival and reproduction.

Reproductive Success

A measure in evolutionary biology indicating the number of offspring an individual or genotype produces and successfully supports to reproductive age.

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A theory suggesting that societies are structured in hierarchies, with certain groups dominating over others.

Evolutionary Psychology

A conceptual strategy in the realms of social and natural sciences, exploring the configuration of the psyche based on recent evolutionary insights.