Suppose Each Good Costs $5 Per Unit and Megan Holds

question 246

Multiple Choice

Suppose each good costs $5 per unit and Megan holds $40. What is the real value of the money she holds?

• A)$40. If the price of goods rises, to maintain the real value of her money holdings she need to hold more dollars.
• B)8 units of goods. If the price of goods rises, to maintain the real value of her money holdings she needs to hold more dollars.
• C)$40. If the price of goods rises, to maintain the real value of her money holdings she need to hold fewer dollars.
• D)8 units of goods. If the price of goods rises, to maintain the real value of her money holdings she needs to hold fewer dollars.

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Definitions:

MIRR

Modified Internal Rate of Return (MIRR) is a financial measure that adjusts the traditional internal rate of return (IRR) to account for the cost of capital and reinvestment of cash flows.

Reinvestment Rate

The percentage rate at which future cash flows from an investment are assumed to be reinvested, affecting the calculation of metrics like Net Present Value (NPV).

NPV

Net Present Value; a calculation used to determine the current value of a series of future cash flows by discounting them at a specific rate.

IRR

Internal Rate of Return; a financial metric used to evaluate the profitability of potential investments by calculating the rate of return that makes the net present value of all cash flows equal to zero.