Scenario: An investor is considering three different investment options. Investing in Option A pays him $4,000 after 6 years, investing in Option B pays him $7,600 after 7 years, and investing in Option C pays him $9,000 after 8 years. If he deposits the amount with a bank, he would receive an annual interest rate of 9 percent.
-Refer to the scenario above.What is the present value of Option C?

Question

Quizplus · Accepted Answer

To find the present value of Option C, we use the formula:

Present Value = Future Value / (1 + r)^n

where r is the annual interest rate and n is the number of years.

Plugging in the values, we get:

Present Value of Option C = $9,000 / (1 + 0.09)^8
= $4,516.80

Therefore, Option C has a present value of $4,516.80.

The best choice depends on the investor's preferences and goals. If they want the highest return on investment, they should choose Option C. However, if they want a quicker return, they could choose Option A, which has a shorter time period. It ultimately comes down to the investor's individual priorities.

Scenario: an Investor Is Considering Three Different Investment Options