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. If the investor plans to invest a sum of $4,000, the net present value of Option C is ________.

Question

Quizplus · Accepted Answer

The net present value of Option C is $516.80. This is calculated by taking the present value of the future cash flow, which is $9,000/(1.09)^8 = $5,168.00, and subtracting the initial investment of $4,000.

An Investor Is Considering Three Different Investment Options