Which of the following investments would have the lowest present value? Assume that the effective annual rate for all investments is the same and is greater than zero. Group of answer choices Investment E pays $250 at the beginning of every year for the next 10 years (a total of 10 payments). Investment B pays $125 at the end of every 6-month period for the next 10 years (a total of 20 payments). Investment A pays $250 at the end of every year for the next 10 years (a total of 10 payments). Investment D pays $2,500 at the end of 10 years (just one payment). Investment C pays $125 at the beginning of every 6-month period for the next 10 years (a total of 20 payments).

Question

Business

Pamela Ellis

11 September, 01:43

Which of the following investments would have the lowest present value? Assume that the effective annual rate for all investments is the same and is greater than zero. Group of answer choices Investment E pays $250 at the beginning of every year for the next 10 years (a total of 10 payments). Investment B pays $125 at the end of every 6-month period for the next 10 years (a total of 20 payments). Investment A pays $250 at the end of every year for the next 10 years (a total of 10 payments). Investment D pays $2,500 at the end of 10 years (just one payment). Investment C pays $125 at the beginning of every 6-month period for the next 10 years (a total of 20 payments).

+3

Answers (1)

Know the Answer?

Kiana Banks · Answer 1

Investment D would have the lowest present value

Explanation:

A is smaller compared to E, This is because the money comes in later

The same argument holds for B and C, that is, B is lower compared to C because the money comes in later too.

A is also lower than B, this is because of the annuity to be received later is larger.

D is just one payment, which means D is the right answer compared to A

This means investment D would have the lowest present value compared to all other investment choices.