Ch 05: Assignment Time Value of Money Back to Assignment Attempts: Average:/4 3. Present value Finding…

Ch 05: Assignment Time Value of Money Back to Assignment Attempts: Average:/4 3. Present value Finding a present value is the reverse of finding a future value is the process of calculating the present value of a cash flow or a series of cash flows to be received in the future Which of the following investments that pay will $10,500 in 13 years will have a lower price today? The security that earns an interest rate of 14.50%. The security that earns an interest rate of 21.75%. Eric wants to invest in government securities that promise to pay $1,000 at maturity. The opportunity cost (interest rate) of holding the security is 13.80%. Assuming that both investments have equal risk and Eric’s investment time horizon is flexible, which of the following investment options will exhibit the lower price? An investment that matures in four years O An investment that matures in three years Which of the following is true about present value calculations? O Other things remaining equal, the present value of a future cash flow decreases if the investment time period increases. Other things remaining equal, the present value of a future cash flow increases if the investment time period increases Grade It Now Save & Continue Continue without saving