The Payback Method and the Accounting Rate of Return Method

question 9

True/False

The payback method and the accounting rate of return method are often used to perform an initial screening of investments, rather than a detailed, in-depth analysis.

---

Definitions:

Reserve Requirement

The minimum amount of reserves that banks are required to hold by law, usually a percentage of their deposits, to ensure bank liquidity.

Open Market Operations

Central bank activities involving the buying and selling of government securities to control the money supply and interest rates.

Discount Rate

The fee in terms of interest that depository institutions and commercial banks pay for loans taken from the lending establishment of their regional Federal Reserve Bank.

Monetary Policy

Monetary policy involves the management of a country's money supply and interest rates by its central bank to control inflation, unemployment, and economic growth.