The Internal Rate of Return Is a Measure Of

question 2

Multiple Choice

The internal rate of return is a measure of:

• A)the rate actually earned by the project,considering the time value of money.
• B)the rate actually earned by the project,based on accounting income.
• C)the rate used to discount the future cash flows to reflect the time value of money.
• D)the firm's cost of capital.

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Definitions:

Perpetuity

A type of annuity that lasts forever, providing payments that continue indefinitely.

Yield

The income return on an investment, expressed as a percentage of the investment’s cost or current market value.

Duration

A measure of the sensitivity of the price of a bond or other debt instrument to a change in interest rates, often noted in years.

Yield Spread

The difference between the yields of two bonds with differing credit qualities, maturities, or issuers.