If the Net Present Value of an Investment Is Negative,then

question 10

Multiple Choice

If the net present value of an investment is negative,then:

• A) the present value of the cash inflows is greater than the present value of the cash outflows.
• B) the discount rate is negative.
• C) the actual rate of return is less than the minimum required rate of return.
• D) increasing the cost of the investment will change the net present value to a positive number.

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Definitions:

Lucky Event

An unexpected occurrence that can have a positive impact on an investment or market outcome, often beyond the investor's control.

Selection Bias

The bias that results from the way in which observations are selected for analysis, leading to results that are not representative of the population being studied.

Random Walk

Describes the notion that stock price changes are random and unpredictable.

Submartingale

A type of stochastic process where the conditional expected future value of the process is at least equal to the present value.