You Are Given Two Choices of Investments,Investment a and Investment

question 9

Multiple Choice

You are given two choices of investments,Investment A and Investment B.Both investments have the same future cash flows.Investment A has a discount rate of 4%,and Investment B has a discount rate of 5%.Which of the following is true?

• A) The present value of cash flows in Investment A is higher than the present value of cash flows in Investment B.
• B) The present value of cash flows in Investment A is lower than the present value of cash flows in Investment B.
• C) The present value of cash flows in Investment A is equal to the present value of cash flows in Investment B.
• D) The present value of cash flows in Investment A is half the present value of cash flows in Investment B.
• E) No comparison can be made - we need to know the cash flows to calculate the present value.

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Definitions:

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