Suppose the Interest Rate Is 8 Percent

question 147

Multiple Choice

Suppose the interest rate is 8 percent. Consider three payment options: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.

---

Definitions:

Considerations

Various factors or aspects that must be taken into account when making decisions or evaluating situations.

Transactions

Transactions refer to the act of conducting business or commercial exchanges between parties, involving the transfer of goods, services, money, or information.

Transformations

Comprehensive changes that significantly alter the nature, function, or condition of an organization, system, or individual.

Primary Reasons

The fundamental or chief causes that lead to a particular outcome, event, or situation.