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I have been trying to do MCQ 34 Qn 1 from BPP revision kit and I don’t understand why they use year from 3-7 to calculate the amount..
I don’t understand either how they arrive at the answer for the question 2.
Can you please help me as I am stuck.
Many thanks
Lourdes
The question says that it starts in 3 years time, which is time 3.
It also says it lasts for 5 years, so it is received at times 3, 4, 5, 7, and 7
So time 3 – 7.For question 2, whichever of the two gives the highest present value would be the one to choose.
(If you need help with the discounting then you need to watch the free lecture on investment appraisal (or the free Paper F2 lectures on discounting))
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