Question 16(1 point)

The interest rate the past several years for the US Federal Government on 30 year bonds has been below 4% since August 2011 and currently is about 3.1%. So, let's use 3% (.03) as the interest rate for discounting. If so, what is the maximum amount it makes sense for the Federal Government to spend today in order to generate $1,000,000 in benefits 30 years from today? (answer is the NPV of $1,000,000 at t=30 years and r=.03).

Question 16 options:

a)

$815,000

b)

$637,000

c)

$516,000

d)

$412,000