When Considering the Present Value of Any Financial Asset That

question 37

Multiple Choice

When considering the present value of any financial asset that makes a stream of payments in the future,we know that if the market interest rate falls,

• A)the present value of the asset will rise.
• B)the future value of the asset will rise.
• C)the current value of the asset will fall.
• D)the present value of the asset will fall.
• E)the present value of the asset is unaffected.

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Definitions:

Fixed Costs

Costs that do not vary with the level of production or sales, such as rent, salaries, and insurance premiums.

Variable Cost

Expenses that change in proportion to the activity of a business, such as costs for raw materials that fluctuate with production volume.

Room Nights

A measure in the hospitality industry, representing the total number of nights that guests have booked to stay in a hotel.

Break-Even Point

The point at which total revenues equal total costs, resulting in neither profit nor loss.