You are considering two investments: A and B.Both investments provide a cash flow of $100 per year for n years.However,investment A receives the cash flow at the beginning of each year,while investment B receives the cash at the end of each year.If the present value of cash flows from investment A is P,and the discount rate is c,what is the present value of the cash flows from investment B? A)P/(1 + c) B)P(1 + c) C)P/(1 + c)ⁿ D)P(1 + c)ⁿ

Question

Quizplus · Accepted Answer

The present value of cash flows from investment B would be equal to the present value of cash flows from investment A discounted by one period. This means we need to divide the present value of cash flows from investment A (P) by 1 + c to get the answer. Therefore, the correct choice is A: P/(1 + c).

You Are Considering Two Investments: a and B