You have been asked to compute the cash equivalent price of a machine assuming the cost (including principal and interest) is to be paid in two equal payments after the acquisition date. What is the interest concept that best describes this application?
A) Future value of an annuity.
B) Future value of a single amount.
C) Present value of a single amount.
D) Present value of an annuity.

Question

Quizplus · Accepted Answer

The application requires the computation of the cash equivalent price of a machine where the cost is to be paid in two equal installments. This is a scenario of a present value of an annuity. Therefore, option D, which is the Present Value of an Annuity, is the best choice.

You Have Been Asked to Compute the Cash Equivalent Price