If a Japanese Company Sells 200 VCRs to a French

question 23

Multiple Choice

If a Japanese company sells 200 VCRs to a French company and uses the money to buy U.S.government bonds,the Japanese merchandise trade balance ________,and the Japanese financial account balance ________.

• A)rises; rises
• B)rises; falls
• C)falls; falls
• D)falls; rises

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Definitions:

Discount Rate

In discounted cash flow examination, the discount rate is used to evaluate the contemporary value of future cash inflows.

Incremental Cost Approach

A decision-making process that focuses on the changes in total cost due to a change in activity or a decision.

Payback Period

The length of time required to recover the cost of an investment, calculated by dividing the initial investment by the annual cash inflow.

Discount Rate

The interest rate applied in determining the current valuation of future cash flows via discounted cash flow analysis.