^Roger^has^the^opportunity^to^invest^$100,000ⁱⁿ^two^different^assets.^The^investmentⁱⁿ^Asset^#1^will^have^a^present^value^of^$120,000.^The^investmentⁱⁿ^Asset^#2^is^expected^to^have^a^future^value^of^$140,000ⁱⁿ^four^years.^If^the^market^interest^rate^is⁵^percent^a^year,^which^one^would^be^the^betterinvestment? A)Asset #2, because its future value is greater than the present value of Asset #1 B)Asset #1, because its present value is greater than the future value of Asset #2 C)Asset #2, because its present value is greater than the present value of Asset #1 D)Asset #1, because its present value is greater than the present value of Asset #2

Question

Quizplus · Accepted Answer

The present value of Asset #1 is $120,000. To compare, we need to calculate the present value of Asset #2 using the formula: PV = FV / (1 + r)^n. The present value of Asset #2 is $140,000 / (1.05)^4 = $115,256. Therefore, Asset #1 has a higher present value.

Roger has the opportunity to invest $100,000 in two Different

^Roger^has^the^opportunity^to^invest^$100,000ⁱⁿ^two^Different