The Net Present Value for Proposals X and Y Has

question 76

Essay

The net present value for Proposals X and Y has been calculated on the basis of the data given below. $$\begin{array} { l r r } & \text { Proposal X } & \text { Proposal Y } \\\text { Amount to be invested } & \$ 145,000 & \$ 280,000 \\\text { Total present value of net cash flow } & 172,000 & 320,000 \\\text { Net present value } & 27,000 & 40,000\end{array}$$ ​
Determine the present value index for each proposal.

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Definitions:

Duration

A measure of the sensitivity of the price of a bond or a bond portfolio to changes in interest rates, usually expressed in years.

Interest-Rate Risk

The risk that an investment's value will change due to a change in the absolute level of interest rates, which can affect both debt and equity instruments.

Bond Portfolio Managers

Professionals who specialize in the strategic management of bond portfolios, aiming to maximize returns and minimize risks for investors.

Active

In finance, refers to a management strategy involving regular buying and selling of assets to outperform the market, opposite of passive strategies like indexing.