What Is the Present Value of the Following Cash Flow

question 115

Multiple Choice

What is the present value of the following cash flow stream at a rate of 12.0%? ​

• A) $9,699
• B) $10,210
• C) $10,747
• D) $11,284
• E) $11,849

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Definitions:

Risk-Free Asset Return

Risk-Free Asset Return denotes the amount of return expected from an investment with no risk of financial loss, typically associated with government bonds.

Standard Deviation

A measure of the amount of variability or spread in a set of data points; in finance, it's often used to quantify the risk associated with a particular investment.

Risk Premium

The additional return expected by an investor for taking on a higher level of risk, compared to a risk-free investment.

Nominal Interest Rate

The interest rate in terms of nominal (not adjusted for purchasing power) dollars.