Why Is It Fairly Easy to Fall into the Trap

question 116

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 nominal cash flows are often not forecast.
• 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:

Dominant Source

The primary or most influential point of information or authority within a context or system.

Sensual Pleasure

Enjoyment derived from the gratification of the senses, often related to touch, taste, smell, sight, and hearing.

Anus

The opening at the end of the digestive tract through which feces exit the body.

Acts As

Functions or serves in a particular role or capacity in a given context or situation.