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When a geometric gradient's growth rate equals the interest rate, the present worth becomes

  • A.the first payment divided by the interest rate
  • B.zero
  • C.infinite
  • D.the first payment times n divided by one plus i

Answer: D

The general formula becomes indeterminate at that point and the limit gives the simpler expression, each payment's discounted value being the same. Every term contributes equally, which is why n appears as a plain multiplier.

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