Which of the following investments has a higher present value, assuming the same (strictly positive)interest rate applies to both investments?
A)Investment X has a higher present value.
B)Investment X and Investment Y have the same present value, since the total of the cash flows is the same for both.
C)Investment Y has a higher present value.
D)No comparison can be made-we need to know the interest rate to calculate the present value.

Question

Which of the following investments has a higher present value, assuming the same (strictly positive)interest rate applies to both investments? 
A)Investment X has a higher present value. 
B)Investment X and Investment Y have the same present value, since the total of the cash flows is the same for both. 
C)Investment Y has a higher present value. 
D)No comparison can be made-we need to know the interest rate to calculate the present value.

Quizplus · Accepted Answer

Since Investment Y has larger cash flows in each year than Investment X, it will have a higher present value assuming the same interest rate.

Which of the Following Investments Has a Higher Present Value