In Which of the Following Situations Would It NOT Be

question 53

Multiple Choice

In which of the following situations would it NOT be appropriate to use the following formula: PV = C0 + C1/(1 + r) + C2/(1 + r) 2 + . . . . + Cn/(1 + r) n when determining the present value (PV) of a cash flow stream?

• A) when short-term and long-term interest rates vary widely
• B) when the inflation rate is high
• C) when yield curves are flat
• D) when the discount rate is high