When Unanticipated Inflation Occurs

question 190

Multiple Choice

When unanticipated inflation occurs:

• A)both creditors and debtors benefit.
• B)both creditors and debtors are hurt.
• C)debtors are hurt, but creditors benefit.
• D)creditors are hurt, but debtors benefit.

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Definitions:

Required Rate

This is the minimum expected rate of return on an investment, dictating the least acceptable compensation for investing capital.

Salvage Value

A prediction of what an asset will be worth on the market at the close of its effective life.

Project Life

The duration from the initiation to the completion of a project, encompassing all stages of development, execution, and finalization.

Profitability Index

A ratio or index that measures the relative profitability of an investment, calculated as the present value of future cash flows divided by the initial investment cost.