To Find the Present Value of an Annuity Due, One

question 81

Multiple Choice

To find the present value of an annuity due, one could

• A) find the present value of an ordinary annuity and add one extra payment.
• B) find the present value of an ordinary annuity but N=1 for the number of periods.
• C) find the present value of an ordinary annuity and divide by 1+i.
• D) find the present value of an ordinary annuity and multiply by 1+i.

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Definitions:

Perfectly Competitive Industry

An industry characterized by many buyers and sellers, where no single entity can influence the market price of the product.

Marginal Cost

The price of manufacturing an incremental unit of a product.

Perfectly Competitive Market

A market structure characterized by an infinite number of buyers and sellers, identical products, no barriers to entry or exit, and perfect information among all participants.

Short-run Industry

A period in which at least one factor of production is fixed, and firms can only partially adjust their production levels.