The Present Discounted Value of an Infinite Stream of Payments

question 94

Multiple Choice

The present discounted value of an infinite stream of payments of $5 per year when the interest rate is 20% is:

• A)1.
• B)5.
• C)25.
• D)100.

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Definitions:

Output Level

The quantity of goods or services produced by a firm or economy in a given period.

External Benefits

Positive effects of a product or service that are enjoyed by people other than those who directly use or consume the product or service.

Private Benefits

The direct advantages or gains accruing to an individual or organization from their economic actions, excluding wider societal impacts.

Producer Surplus

The difference between the amount that producers are willing to accept for a good or service and the actual amount they receive in the market.