Two Investments Have the Same Total Cash Inflows and the Same

question 76

Multiple Choice

Two investments have the same total cash inflows and the same payback period. Therefore:

• A) These two investments are equally desirable.
• B) These two investments must be identical in terms of the present value of the cash inflows.
• C) The payback period method can help decision makers choose between these two investments.
• D) One pattern of cash inflows may, in a present value sense, be preferable to the other investment's pattern of cash inflows.
• E) Most likely, these two investments required approximately the same initial investment.

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Definitions:

Deposits

Funds placed into an account at a financial institution for safekeeping and to earn interest.

Excess Reserves

Excess reserves are the funds that banks hold over and above the required minimum reserves mandated by central banking regulations, often stored in central banks.

Treasury Bonds

Long-term government securities issued by the U.S. Department of the Treasury. They carry a fixed interest rate and have maturities ranging from 20 to 30 years.

Money Supply

The comprehensive sum of all available financial assets within an economy at a particular time, including cash, coins, and account balances in checking and savings.