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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Definitions:

Consumer Goods

Products sold to consumers for their personal or household use, as opposed to industrial goods which are used to produce other goods.

Standard Of Living

The quantity of financial wealth, ease of living, possessions in material form, and required sustenance for a certain socioeconomic sector or geographic locale.

Government Policies

Strategies and decisions made by governmental bodies to guide public administration and achieve particular outcomes.

Equality

The state or condition of being equal, especially in status, rights, and opportunities.