The Textbook Presentation of Present Value Involves an Important Simplification

question 20

Multiple Choice

The textbook presentation of present value involves an important simplification of reality in order to analyze the concept.That simplification is in assuming that

• A)the future stream of MRPs lasts for one period only.
• B)the future stream of MRPs of a unit of capital is known with certainty.
• C)all units of capital generate an identical stream of MRPs.
• D)the future stream of MRPs is constant over time.
• E)the interest rate is constant over time.

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