Compute the Duration for the Data in This Problem Using

question 42

Multiple Choice

Compute the duration for the data in this problem using a discount rate of 12%.

$\begin{array}{c}\begin{array}{|c|}\hline\\\hline\text {Year, t} \\\hline1\\\hline2\\\hline3\\\hline3\\\hline\end{array}\begin{array}{c|}\hline \text{Cash}\\\hline\text {Flow}\\\hline90\\\hline90\\\hline90\\\hline1000\\\hline\end{array}\end{array}$

• A)3.00 years
• B)2.95 years
• C)2.85 years
• D)2.75 years
• E)2.65 years

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Definitions:

Dividends

Payments made by a corporation to its shareholder members, usually out of profits or reserves.

Working Capital

Current assets minus current liabilities, representing the short-term liquidity and operational efficiency of a business.

Current Ratio

An indicator of financial health showing whether a business can cover its short-term debts with assets that can be quickly converted into cash.

Acid-Test Ratio

A stringent indicator of a company's short-term liquidity, calculated by dividing liquid assets by current liabilities.