Multiple Choice Questions:
Question 1:
If the single amount of $5,000 is to be received in 3 years and discounted at 6%, its present value is
A) $4,198.
B) $4,717.
C) $4,333.
D) $4,700.
Answer:
Question 2:
Which of the following discount rates will produce the smallest present value?
A) 4%
B) 8%
C) 9%
D) 10%
Answer:
Question 3:
Suppose you have a winning lottery ticket and you are given the option of accepting $5,000,000 three years from now or taking the present value of the $5,000,000 now. The sponsor of the prize uses a 6% discount rate. If you elect to receive the present value of the prize now, the amount you will receive is
A) $4,198,100.
B) $4,319,200.
C) $4,450.
D) $5,000,000.