Suppose the interest rate is 8 percent. Consider three payment options:
1) $200 today.
2) $220 one year from today.
3) $240 two years from today.
Which of the following is correct?
A) Option 1 has the highest present value and Option 2 has the lowest.
B) Option 2 has the highest present value and Option 3 has the lowest.
C) Option 3 has the highest present value and Option 1 has the lowest.
D) None of the above is correct.

Question

Suppose the interest rate is 8 percent. Consider three payment options: 
1) $200 today.
2) $220 one year from today.
3) $240 two years from today.
Which of the following is correct?
A) Option 1 has the highest present value and Option 2 has the lowest. 
B) Option 2 has the highest present value and Option 3 has the lowest.
C) Option 3 has the highest present value and Option 1 has the lowest.
D) None of the above is correct.

Quizplus · Accepted Answer

The Answer of Suppose the interest rate is 8 percent. Consider three payment options: 
1) $200 today.
2) $220 one year from today.
3) $240 two years from today.
Which of the following is correct?
A) Option 1 has the highest present value and Option 2 has the lowest. 
B) Option 2 has the highest present value and Option 3 has the lowest.
C) Option 3 has the highest present value and Option 1 has the lowest.
D) None of the above is correct.

Suppose the Interest Rate Is 8 Percent