Suppose That the Present Value of Receiving a Guaranteed R450

Multiple Choice

Suppose that the present value of receiving a guaranteed R450 in two years is R385.80.The opportunity rate of return on similar risk investments is 8 percent.According to this information, all else equal, which of the following statements is correct?

A) It always would be preferable to wait two years to receive the R450 because this value is greater than the present value.
B) Risk averse investors always would prefer to take the R385.80 today because it is a guaranteed amount whereas there is uncertainty as to whether the future amount will be paid.
C) No investor should be willing to pay more than R385.80 for such an investment.
D) It is apparent the present value was computed incorrectly because the present value of a future amount always should be greater than the future value.
E) None of the above is a correct answer.