Consider the Following Statements About the Accounting for Inflation in a Capital

question 17

Multiple Choice

Consider the following statements about the accounting for inflation in a capital budgeting analysis:
I. An analyst can use nominal dollars in conjunction with a nominal interest rate.
II. An analyst can use real dollars in conjunction with a real interest rate.
III. An analyst can use nominal dollars in conjunction with a real interest rate.
Which of the above statements is (are) correct?

• A) I only.
• B) II only.
• C) III only.
• D) I and II.
• E) II and III.

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