Consider the two investments shown in the table.Find the present value of each at Year 0 assuming an interest rate of 5%.What is the percentage difference in the present values (with Investment 1 as the base of the percentage)?

A) -3.8%
B) -2.6%
C) 3.5%
D) 4.3%
E) -4%

Question

Consider the two investments shown in the table.Find the present value of each at Year 0 assuming an interest rate of 5%.What is the percentage difference in the present values (with Investment 1 as the base of the percentage) ?

A) -3.8% 
B) -2.6% 
C) 3.5% 
D) 4.3% 
E) -4%

Quizplus · Accepted Answer

Step 1 - Find the present value of each investment.
PV = 11ea7fdb_fc2c_ef7c_a768_25019c6e0864_TB2902_00 11ea7fdb_fc2c_ef7d_a768_179904db74b7_TB2902_00 = 11ea7fdb_fc2c_ef7e_a768_edcf1c64acab_TB2902_00 + 11ea7fdb_fc2d_168f_a768_674ff939606c_TB2902_00 + 11ea7fdb_fc2d_1690_a768_3d1e970fbe58_TB2902_00 = $1,136.16 11ea7fdb_fc2d_1691_a768_6d9fff81ec9b_TB2902_00 = 11ea7fdb_fc2d_1692_a768_41bad16fabd6_TB2902_00 + 11ea7fdb_fc2d_1693_a768_c529ead8233a_TB2902_00 = $1,092.97
Step 2 - Find the percentage difference between the two investments. 11ea7fdb_fc2d_1694_a768_bfe69492551c_TB2902_00 = -3.8%

Consider the Two Investments Shown in the Table