A building owner charges net rent of $20 in the first year,$21 in the second year,and $22 in the third year.Using a 10 percent discount rate,what is the effective rent over the three years?

Question

Quizplus · Accepted Answer

To find out the effective rent over the three years, we need to calculate the present value of the net rent for each year and then add them up. Using a 10% discount rate, the present value of the net rent for each year is:

Year 1: 
PV = $20 / (1 + 0.1)^1 = $18.18

Year 2: 
PV = $21 / (1 + 0.1)^2 = $17.35

Year 3: 
PV = $22 / (1 + 0.1)^3 = $16.62

The effective rent over the three years is the sum of these present values:
Effective Rent = $18.18 + $17.35 + $16.62 = $52.07

Therefore, the answer is B.

A Building Owner Charges Net Rent of $20 in the First