Why Is It Fairly Easy to Fall into the Trap

question 107

Multiple Choice

Why is it fairly easy to fall into the trap of discounting real cash flows with nominal rates?

• A)it is difficult to determine real discount rates.
• B)increases in nominal cash flows are often not forecast.
• C)inflation does not impact cash flows, but it does impact discount rates.
• D)increases in revenues are offset by increases in costs.

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Definitions:

Dominant Culture

The cultural values, beliefs, and practices that are most influential within a society, often setting norms and standards for behavior.

Adapt

The process of changing or adjusting in response to new conditions or environments.

Social Readjustment Rating Scale

A scale that measures the amount of stress in a person's life over a 1-year period resulting from major life events, both positive and negative.

Major Life Events

Significant occurrences in a person's life that require adjustment or adaptation, such as moving, marriage, or experiencing loss.