The Present Value of a Promise to Pay $5, 000

question 146

Multiple Choice

The present value of a promise to pay $5, 000 every year forever when the prevailing interest rate is 10 percent equals

• A)$5, 000
• B)$50, 000
• C)$100, 000
• D)$250, 000
• E)$500, 000

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Definitions:

Chapter 7

A provision under the U.S. Bankruptcy Code allowing for liquidation of a debtor's assets to pay off creditors.

Discharge

A written federal court order signed by a bankruptcy judge stating that the debtor is immune from creditor actions to collect debt; that is, a release from liability.

Federal Court Order

A legally binding directive issued by a federal court, requiring certain actions to be taken or ceased.

Bankruptcy Judge

A specialized judge who presides over bankruptcy cases, making decisions regarding the legal and financial affairs of individuals or businesses declaring bankruptcy.