Economists Novy-Marx and Rauh Contend That

question 22

Multiple Choice

Economists Novy-Marx and Rauh contend that

• A)states are in fine shape with regard to their pension liabilities but that cities are not.
• B)states and cities are in fine shape with regard to their pension liabilities.
• C)states and cities are in poor shape with regard to their pension liabilities.
• D)cities are in fine shape with regard to their pension liabilities but that states are not.

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Definitions:

Net Present Value

The difference between the present value of cash inflows and the present value of cash outflows over a period, used in capital budgeting to analyze the profitability of an investment.

Default Probability

The likelihood that a debtor will fail to make required payments on their debt.

Monthly Interest Rate

The interest rate that is applied on a monthly basis to the principal of a loan or mortgage to calculate the monthly interest payment.

Net Present Value

A valuation method that calculates the present value of an investment's expected cash flows, minus the initial investment cost.