You Plan to Analyze the Value of a Potential Investment

question 16

Multiple Choice

You plan to analyze the value of a potential investment by calculating the sum of the present values of its expected cash flows.Which of the following would increase the calculated value of the investment?

• A) The cash flows are in the form of a deferred annuity,and they total to $100,000.You learn that the annuity lasts for 10 years rather than 5 years,hence that each payment is for $10,000 rather than for $20,000.
• B) The discount rate decreases.
• C) The riskiness of the investment's cash flows increases.
• D) The total amount of cash flows remains the same,but more of the cash flows are received in the later years and less are received in the earlier years.
• E) The discount rate increases.

Understand the fundamental principles of creativity and how it is initiated.

Recognize the role of habit and divergent thinking in enhancing or inhibiting creativity.

Identify the characteristics and behaviors that foster creativity in individuals and groups.

Understand the misconceptions about creativity and intelligence.

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Definitions:

Risk-Free Rate

The theoretical rate of return on an investment with no risk of financial loss, typically represented by government bonds.

Standard Deviation

A statistical measure of the dispersion or variability in a dataset, commonly used in finance to measure the volatility or risk associated with a particular investment.

Optimal

Referring to the most favorable or advantageous condition or level.

Optimal Risky Portfolio

A portfolio composition that offers the highest expected return for a given level of risk or the lowest risk for a given level of expected return.