For Calculating Net Present Value (NPV), the Interest Rate Represents

question 110

Multiple Choice

For calculating net present value (NPV) , the interest rate represents the _____ of investing, so a higher interest rate _____ the NPV.

• A) opportunity cost; increases
• B) opportunity cost; reduces
• C) benefit; increases
• D) benefit; reduces

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Definitions:

Equity Method

An accounting technique used to record investments in associate companies, whereby an investor adjusts the carrying amount of the investment to recognize its share of the earnings or losses of the associate.

Investment Account

An account held at a financial institution that is used to buy, hold, and sell investments such as stocks, bonds, and mutual funds.

Cost Model

An accounting method that values an asset based on the amount spent to acquire it minus any depreciation.

Dividend Income

Income earned from owning shares in a company, paid out from the company's earnings to shareholders.