Asked by Javier Sanmartín Miramontes on Jul 02, 2024
Verified
If the annual interest rate is 0%,the net present value of receiving $550 in the next year is
A) $550
B) $551
C) $549
D) $500
Annual Interest Rate
The percentage that is applied to a sum of money, including loans or savings, indicating the amount earned or paid over a year.
- Identify the impact of interest rates on investment decisions.
Verified Answer
AK
Assylzhan Kazimova4 days ago
Final Answer :
A
Explanation :
When the annual interest rate is 0%, the present value of receiving $550 in the next year is simply $550. This is because there is no discounting of future cash flows in the absence of an interest rate. Therefore, the net present value (NPV) of receiving $550 is also $550. None of the other options are correct as they do not reflect the actual NPV in this scenario.
Learning Objectives
- Identify the impact of interest rates on investment decisions.