Since the Future Holds More Uncertainty Over Longer Periods of Time,lenders

question 109

Multiple Choice

Since the future holds more uncertainty over longer periods of time,lenders generally want:

• A)a higher interest rate for loans over a longer period.
• B)a lower interest rate for loans over a longer period.
• C)a higher interest rate for loans over a shorter period.
• D)None of these is true.

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Definitions:

Internal Rate Of Return

A measure employed in evaluating financial returns to gauge the potential profitability of investments.

Discount Rate

The interest rate used to discount future cash flows to their present value, reflecting the time value of money and risk.

Profitability Index (PI)

The profitability index is a calculation used to assess the relative profitability of an investment, based on its present value of future cash flows per unit of investment.

Profitability Index (PI)

A calculation that relates the benefits of an investment project to its costs, often used to compare the attractiveness of different projects.