The Interest Rate Expressed as If It Were Compounded Once

question 64

Multiple Choice

The interest rate expressed as if it were compounded once per year is called the _____ rate.

• A) stated interest
• B) compound interest
• C) effective annual
• D) periodic interest
• E) daily interest

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Definitions:

Discount Rate

The interest rate used to discount future cash flows to their present value, enabling comparison of the value of investments made at different times.

Net Present Value

A method used to evaluate investments by calculating the present value of expected future cash flows minus the initial investment cost.

Cash Inflows

Refers to the money received by a company during a particular period, including revenues from sales, investments, and financing activities.

Minimum Acceptable Rate

The lowest rate of return on an investment that a manager or investor is willing to accept.