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:

Mandatory Minimum Sentences

Laws that set the minimum sentencing guidelines judges must follow when convicting individuals of certain crimes, reducing judicial discretion.

Unethical

Actions or behaviors that are considered wrong or improper according to moral principles.

Disproportionately Severe

Punishments or actions that are excessively harsh or severe in relation to the nature of the offense or situation.

Morality Policy

Refers to government actions designed to address issues considered to fundamentally pertain to moral values, such as abortion, drug use, and same-sex marriage.