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:

Frontal Cortexes

The frontal cortexes are regions of the brain involved in decision making, problem solving, control of purposeful behaviors, consciousness, and emotions.

Plasticity

The capacity of the brain to adapt to changes such as brain damage.

Speech Therapy

A field of healthcare dedicated to diagnosing and treating communication disorders and speech problems.

Trauma

A deeply distressing or disturbing experience that can have long-lasting psychological impacts.