At the interest rate r, the price of a depletable natural resource three years from the present (price in present = P) will be, everything else being equal, which of the following?
A)3P
B)P₃
C)P(1 + r)3
D)3P(1 + r)3

Question

At the interest rate r, the price of a depletable natural resource three years from the present (price in present = P) will be, everything else being equal, which of the following?
A)3P 
B)P₃ 
C)P(1 + r)3 
D)3P(1 + r)3

Quizplus · Accepted Answer

The price of a depletable natural resource three years from the present (price in present = P) will be equal to the present value of that future price, which is P times (1 + r) raised to the power of 3 (since it's three years from the present). Therefore, the answer is P(1 + r)3.

At the Interest Rate R, the Price of a Depletable