If the Interest Rate Is Zero, a Promise to Receive

question 90

Multiple Choice

If the interest rate is zero, a promise to receive a $100 payment one year from now is:

• A)More valuable than receiving $100 today
• B)Less valuable than receiving $100 today
• C)Equal in value to receiving $100 today
• D)Equal in value to receiving $101 today

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Definitions:

Disclosure

The act of making new or secret information known, often required in legal and financial contexts to ensure fairness and transparency.

Section 16(b)

A provision in the U.S. Securities Exchange Act of 1934 that aims to prevent insider trading by requiring the disgorgement of profits made from the purchase and sale, or sale and purchase, of an issuer’s equity securities within a six-month period by directors, officers, or shareholders owning more than 10% of a firm.

1934 Securities Exchange Act

A U.S. federal law that governs the trading of securities, such as stocks and bonds, to protect investors from fraud.

Insiders

Individuals who possess access to confidential information about a company or organization, such as employees, directors, or large shareholders.