Using Progressively Higher Discount Rates

question 16

Multiple Choice

Using progressively higher discount rates:

• A) tends to reduce early and late cash flows equally.
• B) tends to penalize early flows more than late flows.
• C) tends to lower net present value.
• D) reflects the decreasing nature of risk in the discount rate.

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Definitions:

Statistically Significant

A determination in statistical analysis that an observed difference or relationship is unlikely to have occurred by chance.

Sample Average

The arithmetic mean of a set of numerical values, calculated by adding them together and dividing by the number of samples.

Skewed Distribution

A statistical term describing a distribution that is not symmetrical and has a long tail on one side of the peak.

Population Average

The mean value of a particular characteristic or measurement across an entire population.