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At a discount rate of about 3.5 per cent, a benefit arising in 50 years has a present value of roughly what fraction of its nominal value?

  • A.one thousandth
  • B.one fifth
  • C.one half
  • D.nine tenths

Answer: B

Discounting at that rate over fifty years leaves under twenty per cent. Distant benefits therefore count for far less than immediate ones in any appraisal. The rate chosen can decide the outcome. Sensitivity to the rate is routinely tested.

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