Which of the Following Correctly Orders the Investment Rules of Average

question 41

Multiple Choice

Which of the following correctly orders the investment rules of average accounting return (AAR) , internal rate of return (IRR) , and net present value (NPV) from the most desirable to the least desirable?

• A) AAR, IRR, NPV.
• B) AAR, NPV, IRR.
• C) IRR, AAR, NPV.
• D) NPV, AAR, IRR.
• E) NPV, IRR, AAR.

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Definitions:

Borrowing Rate

The interest rate that a financial institution charges a borrower for the use of money.

Principal

The original sum of money borrowed in a loan, or the amount of the loan that has yet to be repaid, excluding interest.

Annual Payments

Regular payments made yearly, often referring to the interest or dividends paid by bonds or stocks.

Compounded Annually

This term refers to the process of calculating interest on both the initial principal and the accumulated interest from previous periods, with the compounding occurring once per year.