Suppose the Nominal Interest Rate Is Zero

question 5

Multiple Choice

Suppose the nominal interest rate is zero. In this situation, the present discounted value of a finite sequence of future payments is equal to which of the following:

• A) the sum of zero.
• B) the square of the sum of all payments.
• C) the sum of all the payments divided by the rate of inflation.
• D) the sum of all payments.
• E) the average value of each payment.

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Definitions:

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