Why Is It Fairly Easy to Fall into the Trap

question 9

Multiple Choice

Why is it fairly easy to fall into the trap of discounting real cash flows with nominal rates?

• A) It is difficult to determine real discount rates.
• B) Increases in cash flows are often not forecasted.
• C) Inflation does not impact cash flows, but it does impact discount rates.
• D)Increases in revenues are offset by increases in costs.

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Definitions:

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