An Investment Should Be Made in Period 0 If

question 24

Multiple Choice

An investment should be made in period 0 if:

• A) desired consumption in period 0 is less than income.
• B) desired consumption in period 1 is greater than income.
• C) return on the investment is greater than the interest rate.
• D) return on the investment is less than the interest rate.

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Definitions:

Dividends Paid

The part of a corporation's profits paid out to its shareholders, typically as cash or more stocks.

Discount

It is a reduction from the usual cost of something, often applied to encourage early payment or to reward bulk purchases.

Interest Expense

The cost incurred by an entity for borrowed funds over a period of time, typically expressed in terms of an annual percentage rate.

Market Interest Rate

The current rate of interest available in the market that borrowers must pay to obtain funds.