A Firm Has Four Different Investment Options

question 152

Multiple Choice

A firm has four different investment options.Option A will give the firm $10 million at the end of one year,$10 million at the end of two years,and $10 million at the end of three years.Option B will give the firm $5 million at the end of one year,$10 million at the end of two years,and $15 million at the end of three years.Option C will give the firm $15 million at the end of one year,$10 million at the end of two years,and $5 million at the end of three years.Option D will give the firm $21 million at the end of one year,nothing at the end of two years,and $9 million at the end of three years.Which of these options has the highest present value if the rate of interest is 5 percent?

• A)Option A
• B)Option B
• C)Option C
• D)Option D

---

Definitions:

Market Demand Curve

represents the total quantity of a good or service that consumers in a market are willing and able to purchase at different prices.

Quantity Demanded

The total amount of a good or service consumers are willing and able to purchase at a specific price.

Price

The amount of money expected, required, or given in exchange for an item or service in a market.

Normal Good

A good for which demand increases as the income of consumers increases, and vice versa.