The price of an asset should
A) exactly equal the total present value of all of the asset's future payments.
B) exactly equal the total future value of all of the asset's future payments.
C) approximately equal X(1 + i)t, where X is the value of the asset, i is the interest rate, and t is the number of years.
D) exactly equal the total present and future value of all of the asset's future payments.

Question

Quizplus · Accepted Answer

The price of an asset should exactly equal the total present value of all of the asset's future payments. This is because the present value represents the worth of future payments in today's dollars, taking into account the time value of money. By discounting all future payments to their present value, we can determine the fair price of the asset.

The Price of an Asset Should