Multiple Choice Questions: Question 1: If the single amount of $5,000 is to be r

Question

Multiple Choice Questions:


Question 1:

If the single amount of $5,000 is to be received in 3 years and discounted at 6%, its present value is

A) $4,198.

B) $4,717.

C) $4,333.

D) $4,700.

Answer:


Question 2:

Which of the following discount rates will produce the smallest present value?

A) 4%

B) 8%

C) 9%

D) 10%

Answer:


Question 3:

Suppose you have a winning lottery ticket and you are given the option of accepting $5,000,000 three years from now or taking the present value of the $5,000,000 now. The sponsor of the prize uses a 6% discount rate. If you elect to receive the present value of the prize now, the amount you will receive is

A) $4,198,100.

B) $4,319,200.

C) $4,450.

D) $5,000,000.

Explanation / Answer

1.PV=A/(1+r)^n =5000/(1+3(6/100))^3 =$4198
so "A "IS THE Answer

2.the higher the percentage ,the higher is the present value

so D is the answer

3.PV=5000000/(1|(6/100))^3

=$4,198,000

so A is the answer

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